Insolvency Made Clear: A Guide for Debtors

Insolvency Law Made Clear – A Guide For Debtors
promoted (and perhaps, not be employed at all). However, the effect is only a
year and a relatively small increase in assets is unlikely to trigger a review by the
Official Receiver. If the income arises after the DRO year, then the debtor can
keep it without needing to repay their earlier debts.
If a debtor qualifies for a DRO, a DRO is likely to be an even better outcome
than an IVA. This is because there is no need to repay the debts: the slate is
wiped clean automatically. It is also because a DRO does not require creditor
approval. No creditor will choose to approve a DRO: it guarantees zero return
and bars them from recovering their debt. A DRO can be challenged, but in
practice, unless the creditor believes that the debtor has substantially more than
£1,000 of assets, it will not be value for money for them to do so. Note the use
of a DRO when negotiating an IVA: if the debtor is in a poor financial position,
they may be able to use the threat of a DRO to ensure that they keep at least a
few hundred pounds of assets left to themselves.
A debt relief order can lead to a debt relief restriction order or undertaking:
these are equivalent to bankruptcy restriction orders, for which see Chapter 9.
The six organisations that can submit DROs all have websites which are written
for the ordinary user and can be consulted for more information about
the process.
Stop press
There is currently a consultation to raise the thresholds to make it easier to obtain
a DRO. This would increase the total amount of debt allowable to £30,000 (from
£20,000); increase the value of assets owned by the individual to £2,000 (from
£1,000); and increase the level of surplus income to £100 (from £50) per month.
1.3 County Court Administration Orders
A County Court Administration Order (CCAO) is another insolvency procedure
where the County Court takes control of the debtor’s finances. It is rarely
used. There were fewer than 150 of these orders made in 2019.
Under s112 of the County Courts Act 1984, where a debtor is unable to pay
a County Court judgment of less than £5,000, the court may make an order
providing for the administration of their estate. This typically is the payment of
the debt by instalment, or the debt may be written off after a certain time. Since
the debt must be less than £5,000, the creditor could not present a bankruptcy
petition in any event.
The debtor needs to complete form N92, which can be found at https://www.gov.uk/
government/publications/form-n92-application-for-an-administration-order.
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