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It’s imperative that you definitely do qualify for a Debt Relief Order (DRO); otherwise it will never start working. This may sound obvious but unfortunately not everyone is eligible to apply for a DRO.

Assuming you do qualify, you will need to contact an authorised advisor, aka an approved intermediary, as your application can only be done through them – they then apply on your behalf. This is because DROs don’t involve the courts but are instead issued by the Official Receiver via The Insolvency Service.

To apply for a DRO application will cost you £90 and must be paid in cash (non-refundable, even if your application is turned down). You may do so at any Payzone outlet, a list of which can be found at www.payzone.co.uk. You are permitted to pay this fee in instalments spread over a period of six months. However, it is of the utmost importance for you to note that no application will be considered until the entire £90 application fee has been received by The Insolvency Service in full.

Consequently, the time it takes from you applying for a DRO to the moment your DRO starts to work is very much dependent on how you choose – or are able – to pay for the application fee. So, please do consider this very, very carefully when weighing up whether to apply for a DRO in the first instance.

A list of approved and reputable authorities able to direct you to an authorised advisor to apply for a DRO can be found at The Insolvency Service online: http://www.bis.gov.uk/insolvency/personal-insolvency/dro-comp

While the application form can only be found online, after submitting it online you must also print and sign a hard copy and then send it to the following address:

 The Debt Relief Order Service
The Insolvency Service
1st Floor, Cobourg House
Mayflower Street
Plymouth
PL1 1DJ

Once your application has been lodged and all forms submitted, you might be asked to provide the Official Receiver with further information regarding your financial state. It’s not definite the Official Receiver will need to contact you but you should cooperate fully if required as it will determine if your application gets approved – and therefore when/if your DRO starts.

Again, the Official Receiver may require further information after you application is approved. Again, you should cooperate fully if required, as it will determine whether your DRO is upheld.

Once up and running the DRO itself will usually last 12 months. This is known as a “Moratorium” period, during which time creditors will not be able to reclaim their money without court permission. After 12 months, you’ll be discharged from the debts that were listed in the terms set out by your Debt Relief Order.

A record of your DRO will be published on the Individual Insolvency Register at: www.bis.gov.uk/insolvency. Your name and address will remain on the register for a period of 15 months and will be available to the public.

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Having read our guides you will understand that a period of bankruptcy involves twin processes: i) the settling of your debts, and ii) the placing of various “Bankruptcy Restrictions” upon you during the time it takes to do so. By bearing in mind that bankruptcy, in effect, is a dual process, it’s easier to clarify when bankruptcy can end. So how long does bankruptcy last?

In short you’ll usually be released – or “discharged” – from your debts after 12 months, on the anniversary of the court granting your bankruptcy order. Discharge is automatic and ordinarily frees you from all Bankruptcy Restrictions too. You would also be removed from the Individual Insolvency Register within three months of discharge.

However, in certain circumstances Bankruptcy Restrictions can continue even after you’ve been released from your debts.

Basically, if the Official Receiver believes you to have been uncooperative, dishonest or careless (providing false information, hiding assets, etc.) at any stage, then they can extend the period that Bankruptcy Restrictions apply. Similarly, breaking any of your Restrictions – a criminal offense – would bring the same action.

 Either way, the Official Receiver will ask you to agree to a “Bankruptcy Restrictions Undertaking”, reimposing the original Restrictions but this time for a set period of between two and 15 years.

Should you refuse, the Official Receiver will apply for a “Bankruptcy Restrictions Order” – with the same effect as above, except you’d also have to go to court, further complicating and extending your bankruptcy.

But assuming you observe all Restrictions and cooperate swiftly and thoroughly throughout, you could qualify for “Early Discharge” (from both debts and Restrictions) – i.e. sooner than the automatic 12 months.

While important to stipulate nobody has the right to early discharge, the Official Receiver will always review your case three months after filing their report on your financial situation with your creditors. For the record, this report tends to be filed within 8 weeks from the date court grants your bankruptcy order.

Should the Official Receiver deem there to be no further matters requiring investigation (and your creditors don’t object) they’ll initiate Early Discharge procedures and send notice to the courts. You’ll receive a copy of this notice, stipulating your new discharge date. Still, even successful Early Discharges are rarely completed less than 6 months from the date of your bankruptcy order.

Lastly, there is the possibility that your bankruptcy could be cancelled, or “Annulled”. You may apply for “Annulment” at any point, providing that:

1. Your initial bankruptcy order should not have been granted; or
2. All your debts (including fees/expenses incurred by bankruptcy proceedings) have been paid in full or guaranteed to the courts’ satisfaction; or
3. You reach an agreement with your creditors – known as an “Individual Voluntary Arrangement” – to repay all or part of your debts.

However, even annulment is never immediate. Scenarios 1. and 2. would involve a court hearing, while 3. may take as long as 5-7 weeks to finalise. The necessary form (7.1A) to proceed in scenarios a) or b) is available for free from The Insolvency Service online.

Unless you have been advised otherwise, your discharge from bankruptcy will happen automatically, so you won’t necessarily get proof sent to you.

Certificate Of Bankruptcy Discharge

Where a bankrupt is entitled to an automatic discharge under the terms of his/her bankruptcy, no formal certificate of discharge will be issued automatically by the court. If written evidence is required, the former bankrupt must apply to the court which dealt with the bankruptcy. A fee is payable to the court for the provision of a certificate of discharge and any additional copies.

Insolvency Register

Details of your discharge will also be on the Insolvency Register for 3 months after discharge. You can print this entry off as proof you’ve been discharged from bankruptcy.

Additionally, a record of your bankruptcy is also made in the Land Charges Registry and it lasts for five years. However, once discharged you can apply to the courts to have the record altered from “bankrupt” to “discharged from bankruptcy”.

Advising the Credit Reference agencies.

Once discharged, the Official Receiver does not automatically inform your credit reference agencies of the end of your bankruptcy – it is down to you to pass on this information – ie. Send on a copy of your Certificate of Discharge, or letter from the Official Receiver, to each of your agencies. Once this is done a record of your discharge will appear on your credit reference file.

Despite discharge, an entry of your bankruptcy will remain on your file for a period of six years from the date of the original bankruptcy order (and may affect your ability to get credit, even after the order has ended). After that time the record shall be automatically removed.

A Debt Relief Order (DRO) is something to apply for if you can’t afford to pay your debts. DROs usually last 12 months, during which time creditors cannot reclaim their money without court permission. After 12 months, you’re discharged from the debts covered by your DRO.

To qualify for a DRO you must have resided, had a property or a business in England or Wales at some point in the last 3 years. Furthermore:

• You must owe £15,000 or less in debt.
• You have a spare available income of £50 or less a month after paying normal household expenses.
• You do not own your home and have assets and savings worth £300 or less.

 Sounds like you? Well, there’s more to be aware of so let’s address each of the above points in turn:

While you may owe £15,000 or less, not all debts are coverable by a DRO, only “Qualifying Debts.” These include: credit cards, overdrafts and loans; rent, utilities, telephone and council tax; benefit overpayments, hire purchases, conditional sale agreements and buy-now-pay-later agreements.

Debts that don’t qualify include: Court fines, confiscation orders and any other fines relating to criminal activity; student loans and social fund loans; child support and maintenance. These must be paid separately and creditors can still take action against you to reclaim them – even if you have a DRO covering other debts.

When calculating spare available income you must be realistic and be honest, taking into account your wage/salary, benefits (if any), pension and contributions from other household members or rental incomes.

“Normal household expenses” include: national insurance, housekeeping, utility bills and childcare costs but a full breakdown can be found at the Citizens Advice Bureau online.

“Assets” are savings, shares, antiques and property (whether owned outright or mortgaged). Vehicles are included if their value is £1000 or greater. Clothes and other household items, like bedding and furniture or tools and equipment used in your job/business are exempt, as are cars less than £1000 or those specially modified to cater for a physical disability.

Unfortunately not everyone may apply for DROs, such as those already bankrupt or if creditors have applied to make you bankrupt, even if the hearing’s yet to take place (unless your creditors agree to DRO application).

Similarly, you can’t apply if you’ve been given a “Banking Restriction Order” or have an “Individual Voluntary Arrangement” (or are applying for one). If you’ve filed for bankruptcy but have yet to be dealt with, you also cannot apply unless, of course, the judge decides a DRO preferable.

Finally, if you’ve been subject to a “Debt Relief Restriction Order or Undertaking”, or have already had a DRO in the past six years, you cannot apply.

If it still sounds like you qualify, then contact an authorised adviser. They check whether you really do meet the criteria and then apply for the DRO on your behalf (while DROs cost £90 you’re permitted to pay in instalments over six months).

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In the event of a successful bankruptcy petition any vehicles you own will be considered assets, and may be sold by the official receiver or trustee.

However, the following circumstances will be considered:

Is the motor vehicle essential for employment or income because:

• You use it on the job
• Travelling to your place of work would be difficult without a car
• Finding work would be more difficult without a car, irrespective of employment at the time of the bankruptcy order
• The vehicle is required for your role as a full time carer

Is the motor vehicle an essential domestic requirement because:

• There are genuine needs that demand a car, not convenience
• You have a disability and there is proof a car gives you an increased level of independence
• There is no alternative for taking children to and from school, and that walking or cycling is impractical

Although the official receiver may agree the vehicle is essential based on those grounds, in instances where the car is valuable a cheaper alternative will be provided at a guideline price of £1000. This means your car may still be sold unless you can prove why you need a more expensive model.

How much will my car be valued at?

The official receiver will take ownership of any vehicle not exempt from the bankruptcy order, and use a price guide to realise the value, aside from instances involving specialist or vintage models, wherein an agent or professional will be consulted.

Is there any way I can still keep my car?

Yes, providing:

• A current insurance certificate, registration document, and roadworthy certificate can be obtained
• A third party will pay the guide price in cash, banker’s draft, or building society cheque, and transfer the car over to you

Can I keep my number plate?

In any event, the official receiver will have any personalised registration valued. This can be bought back if a third party is willing to pay the costs.

What if the vehicle has no value?

It may be possible to agree a sale price at a nominal amount, including any value left in the road fund licence. This includes vehicles that are not roadworthy, which the official receiver can sell to you for a token fee, providing you sign a declaration stating the vehicle will not be driven or parked on the public highway until it is fixed. The official receiver can also arrange for any unwanted vehicles to be disposed of responsibly.

My vehicle was bought on finance- what happens now?

Hire purchase, leasing agreement or conditional sale means you do not own the vehicle. Terms and conditions vary from company to company, but it is highly likely that the firm will end the arrangement, and take back the vehicle.

The value of the vehicle will be judged based on the finance company’s report to the official receiver, which details the settlement figure and any outstanding payments. If a sale would benefit your bankruptcy then this will be arranged, otherwise the vehicle will be returned to the financier. When repayments are up to date, a third party may be able to take over the agreement, based on the decision of the company.

Times have, of course, changed dramatically since the days of Fleet Street debtor’s jail, albeit safe to say London’s traditional newspaper HQ still has just as many unscrupulous types hanging around. Regardless of progress in terms of financial support, though, it’s safe to say when loans and credit cards begin to spiral out of control there are few more stressful scenarios to deal with in life.

It’s no news that over recent year the UK has seen a spike in insolvency cases. An era of austerity, it seems as though most of us have serious money worries, save for the old privileged few. But, contrary to popular misconceptions, there are several courses of action, with varying repercussions on your credit rating, which could help- even when the situation looks particularly dire.

In short then, bankruptcy isn’t the only way to try and escape crippling accounts with creditors you have seemingly no chance of settling without taking drastic action. More so, it’s by far the most extreme option out there, and as such even if you do qualify for proceedings it’s essential to get some professional advice, as there may be a far better alternative out there that will impact less on your financial future.

At the most basic level, knowing when you are in a position to file for bankruptcy is relatively simple. There will be little to no disposable income available to pay off unsecured debts, and one or more creditors will be owed £750 or more in order for a petition to be made. Further to this, the total value of assets- e.g. savings and property- must be less than the total amount owed out. Put simply, even if you sold everything there would still be balances outstanding that need to be addressed.

In addition to having genuine debt problems that require urgent action you will also need to be in a position to pay the charges associated with your petition. For applications in England and Wales a total of £700 in fees, split between the court and official receiver, will be due, in Northern Ireland the same costs are set at £460, with an additional £7 for solicitor’s fees. It’s also worth noting that if you’re on benefits, have been made redundant, or have a particularly low income there may be entitlement to a reduction, which is judged on a case-by-case basis.

Irrespective of circumstance the official receiver’s fee will always have to be paid in full, and the charges for filing a petition at court are non-refundable. This means even if you aren’t declared bankrupt the costs will remain the same, all of which are due prior to any judgement being made as to your case. Evidence, if it were needed, that you must fully consider the proverbial fine print before making any decision to proceed with an application, in turn accentuating the need to contact a debt advice organisation or charity.

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Your pension may be one of your largest assets. You may have a personal pension to which you have been contributing for many years. Perhaps you are in your employer’s pension scheme? Or, maybe you are entitled to a state pension?

So, what happens to your pension in bankruptcy? Here, we look at the impact of bankruptcy on your private pension and your state pension. We also consider what happens to any pension payments you are receiving when you are made bankrupt.

What happens to your existing pensions?

Until recently, if a bankruptcy order was made on a bankruptcy petition presented on or after 29 May 2000, all pension schemes that had been approved by HM Revenue and Customs (HMRC) remained outside a bankrupt’s estate. This meant that your pensions could not be claimed by the trustee in bankruptcy.

‘Approved’ pension schemes include personal pension schemes approved by HMRC, stakeholder pensions and other schemes registered under section 153 of the Finance Act 2004. If the Official Receiver is in any doubt as to whether your pension scheme has been approved by HMRC, he or she will write to your pension provider for confirmation. If your pension scheme is ‘unapproved’, you may still be able to exclude it from your bankruptcy estate by applying to court for an exclusion order or by making a qualifying agreement with your trustee.

Pensions expert and lawyer Simon Tyler says: “Individuals usually think that the money they put into a pension scheme will be out of any creditors’ reach if they become bankrupt. That is generally true for individuals who are not yet drawing a pension from the scheme.”

However, following a ruling on 4 April 2012, your personal pension is not automatically safe from creditors. The judgement in Raithatha v Williamson means that if you are of an age where you are entitled to draw from your private pension (typically age 55) and have not done so, creditors can force you to use that money to pay off their debts.

In general terms:

• Creditors cannot demand payment from your pension if you are below retirement age
• Creditors may be able to force you to access money from your personal pension if you are at an age where you can draw from it (even if you haven’t done so yet)

If you’re not sure what will happen to your pension, make sure you take professional advice.

What happens to your state pension?

The trustee in bankruptcy cannot claim your state pension, any payments from the State Second Pension (formerly known as SERPS) or any protected rights. ‘Protected rights’ are those which arise in any pension you may have where you or your employer have contracted out of SERPS.

What happens to any pension payments you are receiving?

When you are made bankrupt, the Official Receiver or your trustee in bankruptcy will often ask you to agree to make regular contributions towards your bankruptcy debts, if you can afford to. You normally do this through an Income Payments Agreement (IPA) or an Income Payments Order (IPO).

The amount you pay is determined by your ‘disposable’ income. This is determined by deducting your day-to-day living expenses from your total income. Your income may include a salary from a PAYE job, self-employment profits, benefits or payments from one or more pensions.

This means that if you are declared bankrupt, you may have to pay part of your pension income to your creditors in the form of an IPA or an IPO

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Bankruptcy is something of a minefield for anyone not working in the insolvency sector. As such an individual looking to make an application of this kind must seek out professional advice in order to have their individual circumstances taken into account.

Every case is different then, though there are some cut and dry guidelines that apply in all instances for cases to be successful. And this goes well beyond having difficulty in paying utility or store card bills, though both of those will be taken into account, because ultimately the test to see if you qualify centres on income and assets versus outgoings, and your long term ability to meet all fiscal responsibilities.

Put simply then if you have little to no available income with which to repay debts to one or more creditors of £750 or more, unsecured, then bankruptcy may be an option, if there is less value in your assets (i.e. car, home, and savings) than there is owed out.  In this scenario there are two possible ways to be declared bankrupt; voluntarily and involuntarily.

Suffice to say the names are self-explanatory, one being where an individual decides debts are no longer manageable, the other where a creditor files against the individual for failing to repay on a loan agreement- from credit cards to purchase hire. When a bankruptcy petition is filed against you a statutory demand will be issued first.

This is a request for payment giving 21 days to settle, or 18 days to provide evidence and request that the court dismisses the claim.

Failure to respond may well result in a bankruptcy order being brought against you, or if trading under a company name, a winding up order can be issued as an equivalent. In both instances an insolvency practitioner (where appointed) and the official receiver for your case can provide assistance with the necessary paperwork and court dates.

Should you wish to file for bankruptcy voluntarily the court requires a debtor’s petition first, in which a request is made that the court declare you bankrupt, with the reasons why outlined- this is done by completing Insolvency Rules 1986 form 6.27. In addition to this, Insolvency Rules 1986 form 6.28, the statement of affairs, will also be required, wherein you need to provide a complete list of individual creditors (names and addresses), along with a Statement of Truth, confirming that the information provided is entirely accurate.

Whether voluntarily or involuntarily filing for bankruptcy the cost in England & Wales is currently £175 court fees, and a £525 official receiver’s fee. For Northern Ireland the rates are £115 court fees, £345 official receiver’s fee, and £7 for a solicitor. Though this outlines some of the basics to the initial process, as highlighted earlier, insolvency is a long and complex procedure, and as such it’s vital that you contact a registered debt charity or organisation before proceeding with a petition, not least as the repercussions that follow any successful application are severe, and seriously impact on your financial future.