Corrupt Politics

Numbers of Applications for the new Debt Release Orders were introduced by the UK government in April this year, are substantially lower than what was expected by the major debt management providers. Numerous reasons have been suggested for this, and one which is consistently mentioned by with industry experts has been pensions.

A Debt Release Order is a debt management product which became available in April 2009, created for people with lower debt levels and available income than those who are eligible for IVA’s . To qualify for a Debt Relief Order someone needs have debt of less than 15,000, be unable to meet their debt payments 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.

Debt Industry insiders see this as an oversight on made by the UK government, as both bankruptcy and IVA’s do not usually consider a person’s pension in any way shape or form. Many experts within the debt industry are blaming the inclusion of pensions as a major reason why DROs have underachieved so significantly.

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.

Tags: Politics