The government has announced plans to make it easier for financially vulnerable people to enter into a Debt Relief Order (DRO).

A DRO is a cheaper alternative to bankruptcy for people with few assets and a low income who have a debt they are unable to pay.

Currently only people with debt of up to £15,000 can enter a DRO – this is set to rise to £20,000. Also, the asset limit to enter a DRO is set to rise to £1,000 plus a vehicle worth up to £1,000. However, a person will still not be able to enter a DRO if they have a surplus income of over £50 per month.

The changes come after a survey revealed that 97% of DRO users said they wouldn’t have been able to cope without a DRO. DROs also had a positive impact on the mental health of 79% of people surveyed.

The move has been welcomed by debt charities and is hoped to benefit up to 3,600 people per year.

The government is also planning to raise the level of debt required to force somebody into bankruptcy proceedings from £750 to £5,000. It is the first time the figures have been revised since 1986.

Mike O’Connor, chief executive of StepChange Debt Charity, said: “Increasing the DRO threshold to £20,000 is an important widening of access to this crucial form of debt relief for those on low incomes and with limited assets. Raising the creditor petition for bankruptcy to £5,000 is a much needed change that will prevent creditors making people bankrupt for an unreasonably small debt.”

Business minister Jo Swinson said: “Struggling with unresolvable debt can cause immense stress for families. These changes will ensure that our debt relief schemes are updated so that they still meet their original goal of providing access to those who need them. They also ensure that bankruptcy, which has the most significant consequences, is reserved for those with sizeable debts.”

Please contact us if you would like advice on the issues raised in this article or any aspect of debt collection.