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Debt recovery remedies on the way - but not until 2009

08 August 2008

But don’t hold your breath. Most of them are not expected until April 2009, at the earliest.

Among the options proposed under the Act, and which creditors could use to recover debts owed are:

Debt Relief Orders (expected April 2009), which introduce a formal one year moratorium on creditors, where the debtor meets certain eligibility criteria, including debts under £15k, assets under £300/£1,000 (for car), and surplus income of less than £50.

After 12 months the remaining debts are written off, providing the debt continues to meet these criteria for the full 12 months. However, those with sizeable assets would not be eligible.
Enforcement Restriction Orders (EROs) impose restrictions of enforcement by creditors and repayment obligations on debtors. (EROs will not apply where the debtor is a debtor under any business debts).

The ERO will prevent the presentation of a bankruptcy petition (but not the continuation of a petition already presented), and will prevent any creditor from pursuing any remedy for recovery of the debt, except in certain circumstances. All of this depends on the debtor, creditor and debt ‘qualifying’ under the Act.

The ‘prevention’ would prevent any ‘remedy for recovery’, and not just the pursuit of a charging order. The ERO can be for a maximum 12 months, and may include a requirement on the debtor to make some payments during the life of the order. Although this does not come into force until October 2010, should lenders consider it in their future business plans?

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