Debt Relief Orders
Debt Relief Orders – 6 April 2009
1. Introduction
1.1 Who should read this practice note?
Solicitors who provide debt advice.
1.2 What is the issue?
The Tribunals, Courts and Enforcement Act 2007 introduced a new form of debt relief called a 'Debt Relief Order' (DRO) which is expected to come into force on the 6 April 2009.
This practice note explains the procedure for DRO applications.
2. What are Debt Relief Orders?
Debt Relief Orders are an alternative to bankruptcy for clients who have
- less than £15,000 in unsecured debt
- less than £300 in assets and
- less than £50 per month disposable income after they have met all their essential expenditure.
Creditors who are included in the DRO will be prevented from taking any action to recover their debts from the client.
Generally the debts of the client will be discharged at the end of one year.
More information about eligibility for DROs can be found on the Insolvency website:
www.insolvency.gov.uk/insolvencyprofessionandlegislation/DebtRelief.htm
3. How is a DRO application made?
Debt advisers act as 'intermediaries' and help debtors to apply online for a DRO via the Insolvency Service website.
A practising certificate is not sufficient to help a client make a DRO application. You must first be approved as an intermediary.
3.1. What is an intermediary?
An intermediary is a trained debt advisor who has been approved to make DRO applications by a 'competent authority'.
3.2. What is a competent authority?
A competent authority is a body authorised by the Secretary of State to approve intermediaries.
3.3. Where can I apply to become an intermediary?
Nine organisations have been given approval to act as competent authorities. The Solicitors Regulation Authority is not registered as a competent authority so holding a practising certificate is not sufficient to act as an intermediary.
The majority of these organisations will only consider applications from their own employees or volunteers.
However, members of the Institute of Money Advisers (IMA) can apply for approved intermediary status. Membership is open to those who provide free money advice, including legal aid solicitors and solicitors who carry out pro bono debt advice.
You can apply to become a member of the IMA on their website:
www.i-m-a.org.uk/membership.html
Details of all competent authorities can be found on the Insolvency Service website:
www.insolvency.gov.uk/insolvencyprofessionandlegislation/DebtRelief.htm
3.4 What training do I need to become an intermediary?
Competent authorities will decide individually how intermediaries are best trained.
Training is free to all members of the IMA and is carried out by the Money Advice Trust.
Information about training to become an intermediary can be found on the IMA website:
www.i-m-a.org.uk/debt-relief-orders.html
4. Debt Relief Orders and the Legal Services Commission (LSC)
The LSC's recent consultation on the Civil Bid Round for 2010 proposed that any provider with a debt contract should offer clients access to at least one approved intermediary.
This is still in the consultation stages but gives an indication of the LSC's approach to DROs.
Download the consultation documentation. The relevant sections are 4.45 and 4.46:
https://consult.legalservices.gov.uk/inovem/consult.ti/2010Contracts/listdocuments
5. More information
5.1 Professional conduct
The following sections of the Solicitors' Code of Conduct 2007 are relevant to this issue:
Rule 1.01 Justice and the rule of law: You must uphold the rule of law and the proper administration of justice
5.2 Further products and support
5.2.1 Practice Advice Service
The Law Society provides support to solicitors on a wide range of areas of legal practice. The service is staffed by solicitors and can be contacted on 0870 606 2522 from 09.00 to 17.00 on weekdays.
www.lawsociety.org.uk/practiceadvice
5.2.2 Law Society publications
5.3 Status of this practice note
Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.
Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.
For queries or comments on this practice note contact the Law Society's Practice Advice Service: www.lawsociety.org.uk/practiceadvice
5.4 Terminology in this practice note
Must - a specific requirement in the Solicitor's Code of Conduct or legislation. You must comply, unless there specific exemptions or defences provided for in the code of conduct or relevant legislation.
Should - good practice for most situations in the Law Society's view. If you do not follow this, you must be able to justify to oversight bodies why this is appropriate, either for your practice, or in the particular retainer.
May - a non-exhaustive list of options for meeting your obligations. Which option you choose is determined by the risk profile of the individual practice, client or retainer. You must be able to justify why this was an appropriate option to oversight bodies.