Starting April 6, people on the lowest incomes will be able to apply for Debt Relief Orders for free in England and Wales. Debt Relief Orders clear outstanding debts, such as council tax, energy bills, and rent, for individuals who are insolvent. The orders previously cost £90, which many debtors could not afford, but changes to the rules now make them free. Debt Relief Orders are for insolvency when the debtor’s financial obligations do not exceed £30,000, which will rise to £50,000 on June 28, 2021.
Olu, from London, was made redundant due to the pandemic, making it difficult for her to find work and pay her debts. Olu struggled to cover her debts using a credit card. She said, “Honestly, I didn’t have the money to pay for anything, so that £90 was like another stumbling block for me.” Olu said that being able to apply for a Debt Relief Order for free “was like a light switch in a dark place for me,” providing new hope for her future.
Debt Relief Orders have become an increasingly vital tool for those struggling to keep up with their payments. In 2020, 31,717 Debt Relief Orders were granted in England and Wales, the most in the last five years. In January 2021, there was a 60% rise in the number of Debt Relief Orders granted compared to January 2020. Similarly, in February 2021, there was a 44% increase compared to February 2020. Rachel Beddow, principal policy manager, at Citizens Advice, stated, “It’s really welcome news, but it’s not job done.” She expressed concern that debt-advice organisations were not being given extra resources to handle the increased demand expected.
Debt charity, Christians Against Poverty, report that around half of their clients have taken out a Debt Relief Order over the last two years, and it anticipates handling an 11% increase in the number of orders that it processes over the coming months. Mark Triggs, a debt coach with Christians Against Poverty in Shropshire, said the change was crucial because of the imperiled financial state of many at the moment. “I’ve known lots of people who are too poor to go bust… it will be manna from heaven to get their debts cleared without having to find the £90 fee,” he said. Debt charities are hopeful that eliminating the fee for Debt Relief Orders will help those who are struggling financially get back on track
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