Changes To Bankruptcy And DRO Rules

Following pressure from debt advice charities and organisations, the government has agreed to change some of the rules of bankruptcy and Debt Relief Orders (DROs). Bankruptcy Clinic welcomes these changes, which will make it harder for creditors to force vulnerable people into bankruptcy, whilst making DROs – an alternative to bankruptcy – available to more people.

This article provides a summary of the key changes, which will take effect from October 2015.



At the moment, a creditor can launch a petition to force an individual into bankruptcy if they can’t afford to repay debts totalling just £750. This amount has stayed the same since 1986, obviously not keeping pace with the average amount of debt owed by people who are having repayment problems. However, the threshold will be raised to £5,000 from October 2015 – a large increase that debt help organisations have admitted they didn’t see coming.


Andy Gorton, Bankruptcy Clinic’s Managing Director, comments: ‘This is great news for people with lower levels of debt, especially where repayment problems are short-term for reasons such as injury, illness or a gap between jobs. The previous bankruptcy threshold of £750 meant that people could be at risk of losing their homes or other assets for owing relatively small amounts, and the increase to £5,000 will help to stop this happening.’


Without the threat of forced bankruptcy looming over their heads, these consumers will now have more breathing space to consider other options for dealing with their debts. These could include a different form of personal insolvency such as an Individual Voluntary Arrangement (IVA) or Debt Relief Order, or an informal option such as a Debt Management Plan.


Debt Relief Orders (DROs)

Introduced in 2009, Debt Relief Orders are designed to help people with few or no assets and/or little or no disposable income to tackle their debts without resorting to bankruptcy. However, there are strict eligibility criteria that an individual must meet to qualify for a DRO, which include a maximum debt level of £15,000.


From October 2015, this threshold will increase to £20,000, making DROs an available debt management option for many more people. The main advantage of DROs over bankruptcy is the amount of the fees involved: just £90 for a DRO, compared to £705 in Court and Official Receiver’s fees for bankruptcy.


According to the Insolvency Service, almost 141,000 people have taken out a DRO since they were introduced in 2009. The new debt cut-off point of £20,000 will enable an extra 3,600 people to benefit from them every year.


The advantage here is that more people in very dire financial straits will be able to avoid paying over £700 for bankruptcy fees,’ says Andy. ‘The irony in the past has been that people in these circumstances couldn’t do anything about their debts because bankruptcy was their only option – but they couldn’t afford to pay the upfront fees. So, whilst an even higher debt limit for DROs would have been welcomed, the increase to £20,000 will certainly make a difference to some of the most financially vulnerable consumers.’


Struggling to make ends meet? Ask Bankruptcy Clinic to help.

Whether you owe less than £750 or more than £20,000, Bankruptcy Clinic will help you find the right solution to your debt problems. Through our partnership with MoneySolve Ltd, a leading debt management firm, we can give you access to a wide range of debt management options – including bankruptcy, DROs, IVAs and Debt Management Plans.


If you live in Scotland, our Scottish partners can also help with solutions such as Protected Trust Deeds, Debt Arrangement Schemes and sequestration.


Contact Bankruptcy Clinic today

Our friendly advisers are ready and waiting for you to get in touch. Call free from a landline on 0808 168 7389 or 01625 462 770 from a mobile. Or complete our online form to find out if you qualify for our help – we’ll get back to you as soon as we can.

Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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