News Article

Consumer Credit

Creditors still chasing debts covered by Debt Relief Orders

By CreditMan Thursday, February 26, 2015

Creditors are causing ‘additional financial distress’ by continuing to collect debts despite the individual having a Debt Relief Order (DRO), reveals Citizens Advice.

A new report, Cutting our losses, published today by the national charity highlights how creditors aren’t acknowledging that debts are cancelled or frozen in a DRO.

In some cases landlords have threatened possession action for non-payment despite the debt being in a DRO.

Citizens Advice helped with 127,000 issues around DROs in 2014.

A survey of 232 Citizens Advice advisers who have helped people with DROs, conducted between August and September 2014, reveals:

  • 85% report clients being chased for payments despite the debts being listed in the DRO.
  • 1 in 4 said clients were still being asked to top up their energy meter to in order to pay fuel debts.
  • Almost a third had helped clients where overpayment of tax credit or benefit was still being sought.
  • 1 in 4 had witnessed a client’s bank account being closed as a result of a DRO even though the client did not have any debts to that bank.

DROs were introduced as an alternative for people on low incomes and without assets who do not have money to apply for bankruptcy but have no way of ever paying back the full debt. The DRO cancels most debts and postpones others such as magistrate court fines and in some cases rent.

Four in five Citizens Advice advisors also find it difficult to get information from creditors about an individual’s debts which they needed to help clients apply for a DRO.