All you need to know about online bankruptcy

A recent report confirmed that as of next year a new form of filing for bankruptcy online would be introduced, and this will be known as a Debt Relief Order. Bankruptcy in its standard form is linked to hassle, embarrassment, inconvenience, time consumption, and sometimes expense.

However, with the introduction of Debt Relief Orders all of these problems may be eliminated for some people that are trying to escape their debts. This has raised concerns amongst officials that an increasing number of people may start filing for bankruptcy unnecessarily due to the ease of the process, and that the convenience will stop people from looking at other alternatives.

When the idea was first looked at a couple of years ago one official from the British Banker’s Association said: ‘We have to be very careful that with the whole panoply of legislative change we are not suggesting that walking away from your debts is more expedient than honouring agreements.’ There are also concerns that the system could be open to abuse, especially when it comes to carrying out checks on the applicant.

One official recently said: ‘It will be difficult for the intermediary to carry out a detailed investigation into the affairs of the debtor because it just wouldn’t be worthwhile financially. Ordinarily, the trustee of a normal bankruptcy order has further powers to investigate the individual, more statutory muscle. This loophole may make it easier for people to break the law.’

So, how exactly will this system work and who will be eligible for these Debt Relief Orders? Below you will find some frequently asked questions relating to this new method of bankruptcy.

When will Debt Relief Orders come in to force?
Debt Relief Orders are due to come into force from next April if all goes to plan.

Who will be eligible for Debt Relief Orders?
In order to be eligible for this process you will need to have unsecured debts of under £15,000. You will also need to have assets of under £300, and must have no more than £50 in surplus income every month. You will need to prove to officials that you cannot afford to repay the money that you owe on your debts.

What are the benefits of the Debt Relief Order?
The main benefits of these Debt Relief Orders are ease, convenience, and affordability. Those eligible for this process will not have to worry about bankruptcy courts or costs involved with bankruptcy. They can file from the comfort of their own home and in private, and there will be no lengthy paperwork to complete, so this process can also save time and ease the stress normally associated with bankruptcy.

What are the dangers of the process?
A number of officials have speculated over the dangers of this process. One of the main points that have been brought up is that the system may be open to abuse, as it could be difficult for officials to verify financial data about the person. Another concern is that it may increase the number of people opting for bankruptcy, as the ease of the process may stop some people from thinking twice before opting for this solution.

How will the process work?
In short, the applicant will apply for the Debt Relief Order online, and will need to convince officials that he or she cannot pay the monies owed. If successful the debts of the applicant will be discharged after one year from the application.

What if my financial circumstances change?
If your financial circumstances change for the better between the time that your application is made and the time that your debts are discharged you will need to inform the relevant authorities. If you are no longer eligible for the plan, or you feel that you can make your debt repayments based on your new financial circumstances, then the Debt Relief Order can be cancelled.

Is the process likely to be popular?
It is likely that this process will gain momentum, particularly amongst low income households with unsecured debts. Officials estimate that during the first year around fourteen thousand Debt Relief Orders will be granted.

What are the alternatives to opting for a Debt Relief Order?
If you have a lot of unsecured debt and are struggling to repay it there are a number of options currently available. You can seek debt counselling and advice from one of the number of debt charities in operation these days. You may find that consolidating all of your debts into one low interest loan could help to ease the strain and reduce your outgoings. You may want to consider opting for a debt management plan, where you pay a set amount each month, which is then distributed amongst your creditors, and this payment continues for a number of years until the debts have been repaid.