Though there are many different options for debt management and debt reduction in both the United States and the United Kingdom, a debt relief order is one of the most commonly used, especially in the UK.
In a sense, a debt relief order is something like an alternative to bankruptcy. It is a debt relief strategy that you should only consider when you seriously can’t pay off your debt, when they’re bogging you down and you have nowhere left to turn. Like bankruptcy, a debt relief order is not all fun and games and will cost you some money. However, it is a much cheaper option than bankruptcy.
Though many people wonder what this is, only a handful of those people can actually go out and get one. To get an order your income has to be under a certain amount. At the same time, your amount of total debt also has to be over a certain amount, or a certain percentage, and you can’t have over a certain amount in your savings.
When you take out an order, it usually lasts for a year. During this year, you are offered relief from your creditors. They are not allowed to harass you or take action against you to get their money back. At the end of the year long period of time, your debts will be wiped clean.
What is the Debt Relief Order Process?
The order process can be a little time consuming and tricky. However, toughing it out and finishing it can seriously help you out.
To start the debt relief process, you much first apply for an order. You can apply for one by sending in an application to the Official Receiver of the Insolvency Service. Your application is then looked over and you’re considered for an order. If you pass through the application process (the requirements listed above, total income, total savings, total debt, are a few of the things looked at), then you are well on your way to starting the next leg of the process.
This so-called next leg begins once your application is accepted. Basically, it ensures that you no longer have to pay any of your debts for the next year.
The Benefits of Debt Relief Orders
Debt relief orders can benefit a debt-ridden household in any number of ways. Many of these benefits are pretty obvious and self-explanatory.
For instance, it offers you relief from your debts. Without having any debts to pay off and having creditors off your back, you can gain a more stable financial footing and make sure that you don’t fall into debt again. Furthermore, it can help you provide for yourself and your family without worrying about paying off debts.
Should You Apply for a Debt Relief Order?
You should only apply for debt relief when the times are really tough. You need to take a good, hard look at your financial situation, consider other debt reduction options, and then make a decision for yourself.
One of the downfalls of a these orders is that it can leave a blight on your credit report. The details of your order will be left on your credit score for up to six years. Having the mark of a debt relief order on your credit score will make it extremely tough for you to take out future loans and negotiate with creditors.
You can also only apply for a relief order if you fall under certain requirements. These are the ones that were mentioned above: income, savings, and total debt.
So, yes, if you have no other options, are smothered with overwhelming debt, and you meet the requirements, then applying for an order might just be the right thing for you to do.
Filling Out a Debt Relief Order Application
Filling out an order application form can be tricky business. For this reason, many people go through a third-party debt advisor. The debt advisor helps you fill out the debt relief application. Their knowledge and input can increase your chances of being accepted.
Remember to consider your debt management options before applying for an order. They should only be used when your debt is truly out of control.
However, if you qualify for a debt relief order and you’re finding it impossible to manage/live with your current debt, then it could very well benefit you greatly.