Personal insolvency: New Debt Relief Order rules
Other articles (Insolvency Practitioner, June 2021):
- Michelle Thorp, CEO
- Kevin Hellard, President
- Payment for the introduction of an insolvency appointment is prohibited – a reminder
- Business support measures extended
- Anti-Money Laundering high-risk indicators
- Updates to Suspicious Activity Reports glossary codes
- Anti-Money Laundering case studies
- National Crime Agency releases National Strategic Assessment of Serious and Organised Crime
- New members sought: Anti-Money Laundering sub-Committee of the Standards, Ethics and Regulatory Liaison Committee
- HMRC updates
- Evaluators and Pre-Packs: What’s new?
- Case law update
- IPA joins the Money Advice Liaison Group as a National Member
- It’s not just the IPA who is 60 this year!
- Meet a Committee member: Clare Lindley, member of the Standards, Ethics and Regulatory Liaison Committee
Our members who operate in the personal insolvency field should note that the expected new Debt Relief Order (DRO) rules, announced earlier this year by the Insolvency Service, will come in on 29 June 2021 (subject to Parliamentary approval).
The Insolvency Amendment Rules 2021 amend R9.9(1)(a)(ii) of the Insolvency Rules 2016. This has increased the amount of the maximum potential realisable value of a motor vehicle which an individual may own from £1,000 to £2,000. Any vehicle where the realisable value is £2,000 or lower must be disregarded, and if an individual owns a vehicle where the realisable value is over £2,000, they would not be able to enter into a DRO.
The Insolvency Proceedings (Monetary Limits) (Amendment) Order 2021 amends the limits for someone to enter into a DRO – so the maximum debts that a person can have to be able to consider a DRO is £30,000 (raised from £20,000); they must not have monthly surplus income of over £75pcm (raised from £50pcm); and maximum total value of property owned is £2,000 (raised from £1,000).
The only change from the initial consideration is that the monthly surplus income was mooted to be raised to £100pcm but has instead been set at £75pcm.
In responding to the consultation on the plans, the IPA conveyed that the proposal to increase the monetary limits £100pcm would likely lead to a significant drop in Individual Voluntary Arrangement (IVA) numbers, and creditor losses, as more people become eligible for DROs. Whilst the impact at £75pcm is significantly less, we are urgently working with the Insolvency Service to understand the practical application for existing IVAs and will update members accordingly.