The government announces outcome of Debt Relief Order consultation: What’s changed?

The government has published the outcome of their consultation on Debt Relief Orders, one of the ways that people can access support if they are in problem debt. Back in February we set up an online action to help people who are in debt to feed directly into the consultation.

Today we heard the results.

While some of the changes are welcome, they do not go nearly far enough to support the millions in debt distress. However, the government is promising a review of all insolvency procedures later in the year. This will be a crucial opportunity to try and push for more changes for the estimated 3 million more people who are at risk of long-term debt problems as a result of the pandemic.

What’s changed?

As proposed in their original consultation, the government is changing the threshold at which people can apply for Debt Relief Orders, from £20,000 to £30,000 of debt. This is welcome and means more people will be able to access this form of support, but there is no reason why people in higher levels of debt shouldn’t be able to access the scheme. What this means is that if you have over £30,000 of debt you still won’t be able to apply for a debt relief order. The only other alternative is to declare bankruptcy, which costs £680.

The government has also made other changes to the eligibility criteria, people can now have assets worth £2,000 instead of £1,000 if they want to try and access a Debt Relief Order; the level of surplus income they can have (before making payments to debtors) changes from £50 to £75 a month; and crucially people are allowed to have a motor vehicle that is valued at up to £2,000 as opposed to £1,000.

This last change is welcome as people were often forced to sell their cars (if valued at more than £1,000) to access the scheme, leaving them without a way to get to work. This isn’t something that was in the original proposal the government made but something many people feedback on through our mass consultation, so well done for getting this change!

The change to surplus income is actually less than the government was originally proposing and means that only the very poor will still be able to qualify.

What hasn’t changed?

The government could have abolished the £90 fee it costs to access Debt Relief Orders. It makes no sense at all to charge people who are in debt to access support, as this will clearly only add to their debts.

They could also have reduced the amount of time that Debt Relief Orders last and support people to write off their debts sooner, after six months than the current twelve. At the moment, as people have to have very little income to stay in the programme it actually acts as a disincentive to find better paid work.

What more needs to be done?

These changes will only help an estimated 15,000 more people, but right now there are 8.5 million people, that’s 1 in 6 in the UK heavily in debt. During the pandemic many more have gone into debt, and the problem has got a lot worse for millions who were in debt already.

The government needs to take much bigger actions to stop people falling into a debt trap and support people to get out.

That’s why we’re calling for a targeted debt write off for those who need it. You can get involved by adding your name to our petition today

Stop debt ruining lives – Reset the Debt!


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