Alternative form of debt relief proposed

Proposals for a plan to provide debt relief for people in England and Wales, who owe relatively little but, because they are on very low incomes and have minimal assets have no way to repay what they owe, within a reasonable time scale, have been published by the Insolvency Service.

Eligible individuals would be able to apply for a 'debt relief order', which would stop debts being enforced and would allow individuals to be free from their debts after 12 months. The proposals have been developed as a result of responses to the 'Relief for the Indebted - An Alternative to Bankruptcy' consultation which
was issued earlier this year and offers a remedy to people for whom the current debt solution procedures are either inappropriate or effectively unavailable because they are inancially excluded.

The proposals developed by The Insolvency Service are intended to be self funding. A debtor who meets specified criteria, including his level of liabilities (no more than £15,000), assets (less than £300) and surplus income (no more than £50 per month) will be able to apply
to the official receiver online via an approved intermediary for a debt relief order.

While the order is in force, debtors will be subject to the same restrictions as if they were bankrupt and, as in bankruptcy, there will be a robust enforcement regime to tackle cases where there has been misconduct.

The Insolvency Service has set up a working party to look at developing the role of the approved intermediaries and the first meeting will take place in December.

Development of these proposals has been included as one of the strands of work contained in the Government's over-indebtedness strategy.