New debt rules to help struggling
If you've been struggling with a large amount of debt, new rules mean more people are eligible for a cheaper alternative to bankruptcy.
This month, Debt Relief Orders have become more accessible. The rule change means someone who has less than £20,000 of debt is now eligible to apply for one, up from £15,000.
A cheaper alternative to bankruptcy
Debt Relief Orders (DROs) work by letting you freeze your debts for a year, after which your debts are often written off if your situation hasn't improved. It's similar to bankruptcy but at a fraction of the cost. A DRO costs just £90, while bankruptcy adds up to £705.
While it's good news more people can apply for these, there are criteria which means some won't be able to. As well as having maximum debts of £20,000, only certain debts qualify. These include credit cards, Council Tax and phone bills, but not court fines, student loans and child support. A debt advisor can help you with all the eligible debts.
Other conditions include you having maximum assets of £1,000 and less than £50 left at the end of the month.
You can only apply for a DRO through an authorized intermediary, which most free debt advisors can put you in touch with. The £90 has to be paid upfront before your application is considered.
Is a Debt Relief Order or bankruptcy right for me?
There are many different debt solutions so you might find an alternative which has less of an effect on you and your future finances. A qualified debt advisor can help you find the right solution for your circumstances.
Both DROs and bankruptcy have consequences, including long term damage to your credit rating and ability to borrow money.
Bankruptcy changes
Another change introduced this month is the level at which you can apply for or be made bankrupt. The amount of debt need to go via this route has risen from £750 to £5,000. Though uncommon, this would mean a creditor can't force someone who owes them money into bankruptcy for a small debt.
Dealing with debt
If you are really struggling with money you owe, the first step should be to seek free and independent advice. There's no need to pay for this service as there are plenty of services across the UK.
Use our debt advice locator to find free and independent advisors near you
This article is provided by the Money Advice Service.
More on AOL Money:
Millions of Brits are turning to credit
Young people are burdened with stifling levels of debt
Seven most common causes of debt
