Government sets out consultation to tackle 'problem debt' | News

Government sets out consultation to tackle 'problem debt'

Proposals have been outlined by the government to increase the financial eligibility criteria for debt relief orders (DROs), helping more people deal with financial difficulties to get a fresh start.

Research shows that the demand for debt advice could increase by up to 60% by the end of 2021 and around 3 million more people than before the pandemic will need support with problem debt by the end of 2021.

The government is publicly consulting on changing the eligibility criteria to enter a DRO to:

  • increase the total amount of debt allowable to £30,000 (from £20,000)
  • increase the value of assets owned by the individual to £2,000 (from £1,000)
  • increase the level of surplus income to £100 (from £50) per month

Business Secretary Kwasi Kwarteng said: "Suffering from financial difficulties places a huge amount of stress on people’s mental health and wellbeing, which is why we are committed to giving more people who are struggling with debt a chance for a fresh start.

"Debt Relief Orders are a valuable tool for supporting vulnerable people to get to grips with their problem debts. Our plans to increase the eligibility criteria will mean many thousands more could benefit from this help."

A DRO is a low-cost and easily accessible debt solution that helps vulnerable people. Delivered in partnership with the professional debt advice sector, DROs protect people from creditor action and after 12 months all debt within the order is written off.

Phil Andrew, CEO of StepChange Debt Charity, said: "Lower income households with few assets are among those most deeply affected by debt during the pandemic. Extending eligibility for debt relief orders will help to give more people a chance to avoid the long-term misery of being trapped by debt that they cannot afford to repay over a reasonable period."

The consultation will run for 6 weeks and, subject to the consultation any changes are anticipated to be put in place in Spring 2021