Pensions Responsible For Poor Performance Of Debt Relief Orders

By: Jon Hunter


Uptake on the UK governments new Debt Release Orders has been much lower than was expected by the major debt management providers. A number of reasons have been suggested for this, and one of the most popular amongst industry insiders has been pensions.
A Debt Release Order is a debt management solution which became available this April, aimed at people with lower levels of debt and income than those eligible for IVA's . To qualify for a DRO a person needs to owe less than 15,000, be unable to pay their debts and own assets of less than 300.
The issue with pensions has happened because with DRO's as unlike traditional forms of debt relief; a pension is seen as an asset. Over 99% of pensions have a value much greater than 300, almost any kind of viable pension will disqualify a person from applying for a Debt relief Order.
Many in debt industry see this oversight on behalf of the government, as both IVA's and bankruptcy do not usually involve pensions in any way shape or form. Many industry professionals are blaming the inclusion of pensions as a major reason why DROs have been so unpopular.
Other reasons mooted for the poor performance of debt relief orders have been the low fees which can be charged for DRO's by insolvency practitioners ,and the low numbers of companies who have be accredited to perform DRO's. Perhaps in the current economic climate, creditors are just more likely to agree to an informal arrangement such as a Debt Management Plan.
Whatever the reasons or group or reasons really is, the under performance on debt relief orders against predictions has been substantial. Mark Sands from KPMG has said that they expect the uptake of Debt Relief Orders to come nowhere near their initial estimate of 150,000 before the end of the year.

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To get advice on applying for a DRO it is best to contact a about debt company in the first instance.

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