Debt Relief Orders – Potential for Increased Demand

Since their introduction in 2010, Debt Relief Orders represent a growth area as one of the debt solutions that are being provided to clients in Northern Ireland.
Debt relief orders are a kind of insolvency that can help you relieve your debts if you don’t own your own home, don’t have much spare income and have debts of £20,000 or less. If one of your creditors has asked a court to make you bankrupt you can ask the creditor to apply for a DRO instead. You are not eligible if you have been previously involved in bankruptcy proceedings or other formal insolvency procedures.

A DRO can mean that an individual might not have to pay certain kinds of debt for a 12-month period. At the end of the period, remaining debts within the Debt Relief Order will be written off or discharged so they won’t have to pay them.

There are several reasons to believe that the demand for DROs may actually increase further:
  • An increase in public awareness, as people become aware of DROs as an option and potential solution
  • Government departments who have taken action to recover historic debt
  • An increase in easy access credit

Current Growth

Although the overall figures are down slightly for the current financial year, there was a significant increase in 2017/18.
Recent figures obtained from the Insolvency Service shows the number of orders completed over the last few years:
Year DRO's Completed
2015/16 443
2016/17 449
2017/18 531

Historic Debt

One relatively recent debt phenomenon has been the growth in historic debts being collected by Government departments. More clients are presenting with HMRC debts dating back a significant period of time. This usually relates to clients who, at some time previously, were self-employed. Many incidents involved incorrect self-assessments and a business being wound down without the correct action being taken to deal with the tax debt. Also, many more are presenting with old welfare debts including Tax Credit overpayments and social security benefits.

Easy Access Credit

There have been numerous new-to-market companies who offer credit to clients with minimum effort required. Below are two examples:

Fast Cash          Approved in seconds               Cash paid in 10 minutes
Cashasap          Instant Loans                           Quick Loans in 1 hour    

This is usually followed by marketing campaigns stating All Credit Scores Welcome which further proves to highlight the target market, i.e. low income, quite often vulnerable, and borrowers who may not be able to access mainstream credit. Many who apply may be in dire need to access cash quickly.
With many DRO cases, the Advice NI debt service is seeing a growing number of clients with numerous debts (often many are these high cost credit) which demonstrates how easy it is to get multiple loans. This is still the case even though the FCA has implemented some stringent rules around such lending. It is hard to believe that creditors are still seemingly cutting corners and not obtaining the required basic lending checks to ensure the integrity of the borrower and their ability to repay. 
The DRO has provided an excellent alternative for low income, no asset clients who cannot afford to pay their debt.  It has been a welcome relief for many clients and an extremely valuable tool for any debt adviser. 
If you need support with debt you can access the NI wide debt service and access face to face advisers on the Advice NI Website.