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During an economic downtime, many people may feel the pressure to file for bankruptcy because of the unrelenting stress of trying to pay off an ever expanding debt. However, bankruptcy is an expensive process. The court fee for bankruptcy is currently £150, administration costs are £345 and, if you go to a High Court a £7 fee is levied for the swearing of the statement of affairs.

Debt relief orders which are only available in the United Kingdom are an excellent way for people who are in debt to avoid filing for bankruptcy and to pay off their debt quickly and efficiently. It’s granted by the Insolvency Service and is a much cheaper alternative than going bankrupt. However, this option is for people who have little disposable income, a few assets and a certain total debt amount.

For example, you can apply for a debt relief order if you:

• do not own things of value or have savings of over £300
• you have spare available income of £50 or less a month after paying your normal household expenses
• do not own a vehicle worth more than £1,000
• do not have a private pension fund worth over £300.
• your unsecured debts do not exceed £15,000.

Certain types of debt cannot be included in a debt relief order. You must pay these separately.

These debts include:

• court fines and confiscation orders. These are fines relating to criminal activity.
• child support and maintenance.
• student loans.

You won’t be able to get a debt relief order if:

• you’re currently bankrupt
• you have an Individual Voluntary Arrangement (IVA) or are applying for an IVA
• your creditors have applied to make you bankrupt but the hearing hasn’t yet taken place. But you might still be able to apply for a debt relief order if your creditors agree
• you have been given a Bankruptcy Restrictions Order or Undertaking
• you have petitioned for bankruptcy but your petition has not yet been dealt with. However, this doesn’t apply if you’ve petitioned for bankruptcy and the judge has referred you for a debt relief order instead
• you have had a debt relief order in the last 6 years

To apply for a DRO, you’ll need to contact an authorised financial adviser who will check whether you meet the conditions and if it is the right solution for your particular circumstances. The order will cost you £90 but you have the option to pay this in instalments over six months.

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