What Is A Debt Relief Order?

A Debt Relief Order is helpful to individuals who are not able to pay of their monthly payments to their creditors. This is a form of insolvency and those who choose to apply for it should do so with the full knowledge of the requirements and consequences of this action. Once an individual has been declared insolvent he or she will have a year of protection from creditors who would take action against them for unpaid debts.

The requirements

In order for an individual to qualify for this kind of action they need to earn a low income and their debts need to be below a certain point. A professional should be consulted in order to find out what these requirements are in the area in which the individual lives. The individual should also not own expensive property such as houses or cars since they will be denied this action if they do.

Contacting an authorised advisor

In order to get the process started an individual should contact an authorized advisor. This advisor will take the individual through all of the steps involved in starting the process. The advisor will also go through all of the financial details of the individual and he or she will then decide whether this is the best course of action or not. If this is the best course of action then the advisor will assist the individual in compiling all of the necessary information and submitting it to the relevant authorities.

The debts that are covered on a Debt Relief Order

There are only a certain amount of debts which can be covered by this action and these include rent, credit cards and other loans. There are debts which cannot be covered by these actions and these include daily expenses. The individual will have to continue providing the basic necessities for him or herself from the money that they have to spare each and every month.

How long does this action last for?

This action usually lasts for one year. During this time the individual will not be required to make the standard payments to their creditors and the creditors will not be allowed to take any legal action against the debtor. During this time the individual will have the chance to rebuild their financial situation. If the situation of the individual improves then he or she will have to submit this information to their advisor and payments will have to be made to the creditor.

Will it affect my credit rating?

This action will affect the credit rating of an individual for up to six years. During this time he or she will not be able to apply for credit and it might be difficult to open up a new bank account. It will take some time in order for the individual to build his or her credit rating up again once this period has come to an end.

Who can apply for this action?

Individuals with low incomes can apply for this action. The amount of debt that is action will cover is not exceedingly high but it can help certain individuals sort through their financial situation. Individuals who are bankrupt cannot apply for this action. If an individual has already applied for bankruptcy or they are undergoing a forced bankruptcy then they will have to wait until the hearing is over before they can apply for this action.

What happens if I have a change in circumstances?

Individuals need to contact their advisor when certain changes have occurred and these include the change in the financial status of the individual. If the individual has acquired money from a will then they will need to inform their advisor of this. They will also need to make sure that the information they have given to their advisor is completely correct. If an individual realizes that he or she has not been completely honest then they need to form their advisor of this as soon as possible. An individual should also inform their advisor of any changes to their income. If they have received any kind of promotion or raise in their salary then this needs to be relayed to their advisor as soon as possible.

Contacting a professional

It is always best to speak to a professional when considering this action. A professional has the knowledge to inform those looking to take this action of the requirements and the restrictions that they will have to follow. A professional will be able to inform the individual of whether they are eligible to take this kind of action or not. Having a sufficient amount of information is necessary in order to make the best possible decision.