Though many people petition for bankruptcy to deal with their debts, just as many shy away from bankruptcy and consider other solutions to straightening out their debt problem. There are a number of different strategies for handling debt. continue

This is a personal decision, greatly influenced by the amount of serious debt and your ability to meet the original payments or pay the full amount. Being hassled by creditors when you are broke is nerve-wracking for starters. Secondly, the decision to petition should not be made solely to stop demanding creditors. Though presenting a petition to Court temporarily stops creditors from engaging in out-and-out enforcement continue

An Application is made to Court. The Court will then send out to the debtor a request to provide details of the debtor’s income and expenditure. The debtor will also be asked to make an offer of stage payments. continue

The typical methods employed in enforcing money Judgements include: (i) Compliance - Very often a Judgement debtor will pay the money owed to a Judgement creditor and thus satisfy the Judgement. If the continue

When the benefits, rights and obligations established by a Judgement between the parties have been exchanged, the Judgement is said to have been satisfied. Until satisfaction, the Judgement remains outstanding and unsatisfied. continue

A County Court Judgement or better known as CCJ is a civil matter which an Order issued by a court that one party to the lawsuit is to pay the other party a sum of money. The amount of the money awarded is referred to as a "CCJ" or County Court Judgement.

A judgment is the official decision of a court of law in a lawsuit. A final Judgment resolves the issues involved in the lawsuit, and determines the rights and obligations that each party in the lawsuit has. continue

Your credit report will show your bankruptcy permanently. This could make it harder to rent an apartment, to obtain a credit card at a favourable rate of interest, and might make it very difficult to obtain a home mortgage loan or insurance. continue

In general charges (such as mortgages and security interests in cars) are non-dischargeable as are some other types of obligations including: Spousal support or Child support Secured debts Fines and penalties imposed by government agencies A non-dischargeable debt is one that will survive the bankruptcy proceeding. The debtor still has the obligation to pay this debt; the creditor has every right to collect.

No. That is why it is so important to consult with an Insolvency Practitioner or Solicitor. Depending on your circumstances, bankruptcy may or may not make sense for you. If after the bankruptcy you will be no better off than you were before, why do it?

Bankruptcy involves the complete liquidation of an individual’s assets, (who is a person rather than a company) with the proceeds used to pay off the debts. However, the debtor can retain certain property that is specifically “exempt” such as tools of one’s trade, a solvent spouse’s equity in a house, and some personal effects. continue

• You must be unable to pay your debts.
• You must owe less than £15,000.
• You can own a car to the value of £1000 but the total value of other assets must not exceed £300.
• After taking away tax, national insurance contributions and normal household expenses, your disposable income must be no more than £50 a month.
• You must be domiciled (living) in England or Wales, or at some time in the last 3 years have been living or carrying on business in England or Wales.
• You must not have been subject to another DRO within the last 6 years.
• You must not be involved in another formal insolvency procedure at the time you apply.

If you think you cannot pay your debts and are considering a debt relief order (DRO) this page will give you some information on:

• whether you meet the requirements for a DRO;
• how much it will cost;
• how to get advice and find an approved intermediary;
• how to apply for a DRO;
• what will happen after you apply for a DRO;  

• You must be unable to pay your debts.
• Your total debts must not be more than £15,000.  This does not include unliquidated debts (debts where the amount due is not yet known) or debts that cannot be included in a BRO.
• Your total assets must not be more than £300.
• Your disposable income after deducting all normal living expenses must not be more than £50 per month.
• You must be living in England or Wales, or at any time during the last 3 years have been resident or carrying on business in England or Wales.
• You must not have been subject to a DRO within the last 6 years. 
• You must not be involved in any other formal insolvency procedure at the time of application for a DRO.
• If you have presented a petition for your own bankruptcy and are awaiting a hearing date, you must have been referred to the DRO procedure by the court.
•  

Restrictions and duties placed on a debtor subject to a DRO:

You have a duty to inform the official receiver of any change of address and any change in circumstances.  You must give the official receiver any information they ask for.You will be subject to the same restrictions as bankrupts.  There are a number of factors to consider in deciding whether bankruptcy, IVA or a DRO is the appropriate option for you. You may wish to consult an Insolvency Practitioner before proceeding with any of the options. 

How to get advice and find an approved intermediary

You can only apply for a DRO through a skilled debt adviser – an ‘approved intermediary’ – who is approved to give advice on DROs by one of the competent authorities.  The intermediary will decide whether a DRO is the best kind of debt relief for you.                                      

How to apply The intermediary may complete the form with you, or they may set up the application and let you fill in the form yourself.You should make sure the information on your application is correct and up to date at the time of submission. If not, your application may be rejected, any DRO may be cancelled and further action may be taken against you.

• If you have been notified that a creditor has presented a bankruptcy petition against you, then you must get that creditor’s permission to apply for a DRO.

How much will it cost? The current fee for a DRO is £90.  It must be paid to the official receiver, in full, before your application will be considered.  

 Do you meet the requirements for a DRO?

To meet the requirements for a DRO:

• the effect of a DRO upon you and your creditors;

 While DROs are aimed at providing a cheap and accessible form of debt relief, they should not be seen as an easy option for resolving your debt problems.

Perhaps the most difficult aspect of trying to get control of your debt can be the stress and fear. Many people – even people who come into debt through no fault of their own, through unexpected illness, injury, job loss or even tricky credit cards – feel shame at their debt. They may try to hide their debt from friends and family, while at the same time trying to make a little income go a long way. continue

Kiran Mistry a leading Insolvency Practitioner said he welcomes the new Debt Relief Orders which have now been introduced by the government to assist people that are facing debts.

Debt Relief Orders (DROs) were introduced by the Government in their 2007 Tribunals Courts and Enforcements Act and they came into existence on 6^th April 2009.  They are designed to provide an alternative to formal bankruptcy or an Individual Voluntary Arrangement (IVA) and are a cheaper and easier alternative to formal court proceedings.

What is a DRO?

A DRO is a new alternative to an IVA or bankruptcy for people unable to pay their debts.   As it costs just £90 it is also significantly cheaper than these other options.  A DRO is issued by the Insolvency Service and is designed to “fast-track” the less complicated debt cases through the court system without the need for an individual to personally appear in court.

Who is eligible for a DRO?

DROs are aimed at the least complicated, smaller debt cases.  Applicants for a DRO must have less than £15,000 of unsecured debt (credit cards, loans or overdrafts or debts relating to rent, council tax or other utilities) and have assets of under £300.  This means that homeowners will be ineligible, as will anyone who owns a vehicle worth more than £1,000 (unless it has been specifically adapted for a physical disability).

Anyone applying for a DRO must also have less than £50 per month surplus disposable income after all their household expenses have been paid.

DROs are designed to be suitable for people with little surplus income and relatively low debt liabilities but who are unable to pay these debts off in a reasonable time.

Anyone who is already involved in court proceedings for an IVA or bankruptcy is ineligible for a DRO even if such an Order has not yet been forthcoming.  Anyone who has had a DRO in the previous six years is also ineligible.

How do I obtain a DRO?

Moe Nawaz a turnaround consultant explains how to apply for a DRO, first you must speak to an authorised intermediary.  This is likely to be a registered insolvency practitioner, turnaround consultant or debt counsellor who has been authorised to deal with DRO applications.  These can be found through your local Citizen’s Advice Bureau or online through the Insolvency service.

Once the advisor has helped you establish eligibility for a DRO an application must be made online and the £90 charge must be paid.  This fee can be paid in six monthly instalments if required.

The Official Receiver then determines whether all the conditions of the DRO have been met and if so a DRO is issued.  The Official Receiver may also ask for any additional information they deem necessary to make a decision on your application.

What does a DRO do?

Once a DRO has been granted you are protected from enforcement by the creditors involved and you no longer have to deal with them directly.  During the period of the DRO (ordinarily twelve months) you do not have to make any payments towards these debts, although you will be expected to continue paying your rent and other household expenses (plus any debts not included in the DRO).  You will also expect to have to contribute something towards the debts if your financial circumstances improve significantly during the DRO period.

You should remember that as with other debt relief solutions a DRO will remain on your credit file for six years and so will impact on your ability to obtain credit in the future.

Whilst not suitable for everyone (particularly anyone who owns their own home or has any significant assets) a Debt Relief Order is another useful method for dealing with debt issues.  As there are now several options available it is important to obtain specialist advice from an insolvency practitioner or other debt specialist to determine which is the most appropriate path for you.

Bankruptcy can be a traumatic and distressing experience.  The stigma that people feel when declaring themselves bankrupt can have a profound effect on their lives although the process of declaring bankruptcy can be much less difficult and stressful than many expect.

Bankruptcy is one of a variety of ways of dealing with debts that you cannot pay.  A court will make a bankruptcy order once it has received a bankruptcy petition, most commonly submitted by an individual (although it can also be submitted by one of their creditors.)

What are the advantages of bankruptcy?

Kiran Mistry a leading Insolvency Practitioner says that the main advantage of a bankruptcy order being made is that it immediately stops the harassment you might be receiving from banks, lenders or other creditors.  Any creditors must apply for outstanding monies through either the Official Receiver or an insolvency practitioner dealing with your bankruptcy order.

When a bankruptcy order is made all or most of the debt is generally written off.  It therefore allows you the freedom to make a new financial start as the bankruptcy orders are ordinarily discharged after twelve months.

What happens to my assets?

In the event of a bankruptcy order being made, the control of your assets normally passes to the Official Receiver or other trustee (generally an insolvency practitioner).  However, items that you require to carry out your job or trade (tools, vehicles etc) and essential household items needed for your family are ordinarily exempt and you are able to retain these.

Other assets are controlled by the Official Receiver or trustee and these are ordinarily sold in order to raise funds to pay the outstanding debts.  These assets may include cars, jewellery or other valuable items.

What should I bear in mind?

Whilst there are some advantages to obtaining a bankruptcy order there are also many negative factors to take into account.  Most importantly, your home may immediately be at risk.  Unless you rent your home (in which case you will generally be allowed to continue living there) the home is considered an asset and therefore could be sold to repay outstanding debts.

Secondly, if an Income Protection Order is issued it means that monies can be deducted from your income for up to three years to go towards paying any outstanding creditors.  Indeed, your employment prospects may well be curtailed after bankruptcy as there are various professions (such as the police and some financial roles) which do not permit individuals who have been bankrupt.   A bankrupt is also prohibited from starting their own limited company or taking on a company directorship.

Most seriously for many, a bankruptcy order also remains on your credit file for up to six years.  This will have a significant adverse impact on your ability to obtain credit, whether that is a mortgage, loan or credit card.  In the event that you are accepted for credit it is very likely that this will be at significantly higher interest rates than an ordinary borrower.

Moe Nawaz a UK Turnaround consultant states that although bankruptcy is one route it should be remembered that there are many other solutions available if you cannot pay your debts.  For example, it may be worthwhile considering talking to a “insolvency practitioner or a debt consultant”, but most important of all never leave things till the last minute get expert advice when you know that you need to talk to an experienced professional who can advise you on steps to take in order to rescue your business.  There are also alternatives including an Individual Voluntary Agreement (IVA) or a Debt Relief Order (DRO) which may be more suitable depending on your individual circumstances.