Writing off debt without going Bankrupt

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As the recession continues to stretch the finances of UK households, financial experts, Baines & Ernst, reveal how it’s possible for people in severe financial hardship to write off debt without going bankrupt.

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The Insolvency Service reported that since 2009 to March 2012, 73,196 people had escaped debt with Debt Relief Orders, with Baines & Ernst playing an important role in the provision of DROs.

The Office of National Statistics (ONS) recently published their Burden of Household Debt Survey, which reported that 36.6% of people are unable to meet unexpected financial expenses – with 6.9 million households without a rainy day fund.

With the country in the grips of a triple dip recession, it’s hardly surprising to hear that people are struggling to save when the cost of everyday essentials is sending their finances rocketing.

And there has been more bad news for the finances of the UK as the country comes to terms with its AAA credit rating downgrade, which could make it harder for the UK to pay off the deficit as the cost of borrowing will increase.

Credit Action – the National Money Education Charity – reported that the level of personal debt in the UK stood at £1.422 trillion. 1,727 people were made redundant between September and November 2012, and 892,000 people had been unemployed for over a year between the same period.

However, the published statistics from Credit Action also stated that £11.38 million worth of loans were written off daily by banks and building societies, so how are people writing off debt they can’t afford to repay?

One contributing factor could be debt solutions such as Bankruptcy and Individual Voluntary Arrangements – as lenders can write off debt that cannot be repaid through these solutions.

However, another explanation could be down to another debt solution – one that isn’t as widely known as other forms of debt help and it’s called a Debt Relief Order (DRO).

Debt Relief Orders were introduced in England and Wales in 2009 and in 2011 for Northern Ireland by the Insolvency Service as an alternative to bankruptcy and are designed to help people on low incomes escape debt in 12 months.

A Debt Relief Order helps those who have debts up to £15,000, have a low income and less than £50 disposable income after paying for other essentials; those who do not own a home and those who do not have valuable assets worth more than £300. The service is provided free of charge by Baines & Ernst; however a fee of £90 must be paid to the Insolvency Service.

Baines & Ernst – one of the leading financial solutions companies in the UK – was awarded Competent Authority Status by the Secretary of State to provide Debt Relief Orders and remains one of a small number of companies approved to provide this service.

A Baines & Ernst spokesperson said “Bankruptcy can be the best solution for some people, but it’s not right for everybody. It’s so important that we can offer help to everyone – whatever their circumstances.

Some people with very little income may feel incredibly stressed and isolated because they can’t afford to repay their debts – even through solutions that are designed to ease the pressure by lowering debt repayments such as Debt Management Plans or IVAs."

“A Debt Relief Order is a legal solution that provides support and reassurance to people struggling with debt, and providing they qualify for a DRO, they could become free from unsecured debts in 12 months. This offers a great deal of peace of mind to people who do not have the finances available to clear their debts.” the spokesperson concludes.

The Insolvency Service reported that since 2009 to March 2012, 73,196 people had escaped debt with Debt Relief Orders, with Baines & Ernst playing an important role in the provision of DROs.

The Baines & Ernst spokesperson adds “20% of Debt Relief Order referrals come from Approved Intermediary and Citizen Advice Bureau recommendations, as well as personal recommendations – which proves the value of our service.

“We have a relatively small team of 5 Approved Intermediaries, and they have provided a dedicated service, overseeing and managing 350 cases each. This equates to 2.4% of all DROs – 8 times the average of the other 1,695 qualified Approved Intermediaries.”

For those in financial difficulty seeking advice on the type of help available to them, Baines & Ernst offer the following advice...

“We urge anyone in financial difficulty to seek advice – the sooner these issues are acted upon, the sooner they can be resolved. We offer a no-obligation financial review to people who need debt advice, which can really help people who want to know what options are available to them.”

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Imran Khan
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