Avenue of relief opened up to more debtors

More consumers who are unable to keep up with their debts will be able to benefit from a low-cost alternative to bankruptcy, it has been announced.

The Government plans to change the rules on who can take out a Debt Relief Order so that people who have a pension are not excluded.

The orders were introduced in April last year to help people who were unable to keep up with their debts and had no assets to offer creditors, but who could not afford to go bankrupt. It costs only 90 to take out one, compared with fees of around 600 to 700 charged to people going bankrupt.

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Orders are available to people with debts of less than 15,000, and who have less than 300-worth of assets, excluding a car, and less than 50 surplus income a month.

But despite significant increases in the number of people taking out orders during every quarter since they were introduced, evidence from debt advice charities suggested that many people were being excluded from them because they had a pension, even though it was low value and they could not draw it for many years.

The announcement was welcomed by debt advice charities.

Sue Edwards, head of consumer policy at Citizens Advice, said: "We warmly welcome this announcement which will benefit those who fulfil most of the criteria for a DRO yet who were having their applications rejected because of very small pension funds, something that has been of great concern to us. However it is crucial that funding for face-to-face debt advice is continued if the most vulnerable people are to benefit."