Think Money

Think Money

May 11, 2009 10:31 ET

Comment on Debt Relief Orders, IVAs and LILAs

LONDON, UNITED KINGDOM--(Marketwire - May 11, 2009) - Following the release of insolvency figures in Scotland in the first quarter of 2009, financial solutions provider Think Money pointed out that the impact of the LILA (Low Income Low Asset) route into insolvency could shed some light on the probable impact of the DRO (Debt Relief Order) on insolvency figures in England and Wales.

In Scotland, 5,693 individuals became insolvent in the first quarter of 2009. This was an increase of 71% compared with the first quarter of the previous year. Significantly, the number of bankruptcies stood at 3,722 - an increase of 158% on the same time period last year (before the introduction of the LILA).

According to, the 'significant increase in bankruptcies is attributed to the introduction on April 1, 2008 of a new route into bankruptcy for people who have low income and low assets'.

It should be stressed that (unlike the LILA) the DRO is a form of insolvency, but will not be counted as a form of bankruptcy.

"Looking to England and Wales," said a spokesperson for Think Money, "it's fair to assume the introduction of the DRO will also have a significant impact on insolvency figures. Accountants KPMG have stated that they expect individual insolvencies to top the 150,000 mark this year - a 40% increase on last year's figures - partly due to the introduction of DROs and partly due to the worsening state of the economy.

"Before the DRO was introduced, many individuals had little opportunity to clear debts which had become unmanageable, as they were unable to afford the fee of around Pounds Sterling 500 which bankruptcy requires.

"Costing just Pounds Sterling 90, the DRO is far more accessible than bankruptcy, and may be suitable for many of those who would already have had themselves declared bankrupt, had they been able to afford the fee. In other words, we may see significant interest in DROs from people whose financial situation has been serious for some time.

"However, the introduction of the DRO is unlikely to be make any difference to the majority of people considering an IVA (Individual Voluntary Arrangement). According to KPMG, the average debt owed by someone entering an IVA in the previous quarter was Pounds Sterling 47,800, putting them well beyond the Pounds Sterling 15,000 limit for DRO eligibility.

"As for the country's economic problems, we may also see people entering a DRO as a result of the recession, although we would stress that no form of insolvency is an appropriate way to address short-term problems. Someone who has recently lost their job but is hopeful about finding new employment in the near future would be better advised to look into alternative, more temporary, ways of helping them survive a (hopefully) short-lived period of financial difficulty.

"In fact, anyone in a DRO is required to report any change in circumstances to the official receiver - who may decide to terminate the DRO if they believe the individual is now capable of making payments to their creditors.

"This is why Think Money stress the importance of providing a comprehensive range of debt solutions. In our experience, this is an essential part of providing a tailored service that truly caters to the individual needs of each customer."

Resources for Editors

Think Money homepage:


Debt Management:


Debt Advice:

About Think Money

One of the UK's leading financial solutions providers, Think Money is headquartered in Salford Quays, Manchester, and employs around 600 employees to deliver a comprehensive range of debt, loan and banking solutions. It defines its mission as 'To educate, rehabilitate and advise on all aspects of financial management'. For more information, contact (0845 056 6480) or visit the Think Money website at

Contact Information