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Maximum Debt For Debt Relief Order

Published October 10, 2023

maximum debt for debt relief order

Introduction

Dealing with overwhelming debt can be a stressful and daunting experience. It can feel like there is no way out and you may be constantly worrying about how to make ends meet. If this sounds familiar, you may be considering a debt relief order (DRO) as a solution. However, before proceeding with a DRO, it's important to understand the maximum debt limit and how it can impact your financial freedom. In this guide, we'll take a closer look at the maximum debt limit for a DRO and provide practical tips for finding financial relief.

What is a Debt Relief Order?

A debt relief order is a form of insolvency that is designed for individuals on a low income with little to no assets. It allows you to have your unsecured debts written off after a designated period of time, usually 12 months. During this time, your creditors are prohibited from taking any further action against you with regards to the debts included in the DRO. Once the DRO expires, your debts are considered to be legally written off, giving you a fresh start.

What is the Maximum Debt Limit for a DRO?

The maximum debt limit for a DRO is currently �20,000. This means that your unsecured debts, such as credit card debts, personal loans, and overdrafts, cannot exceed this amount in total. If your debts exceed this limit, you will not be eligible for a DRO and will need to explore alternative options such as an Individual Voluntary Arrangement (IVA) or bankruptcy.

Is the Maximum Debt Limit Different for Everyone?

Yes, the maximum debt limit for a DRO may vary for different individuals. It is determined by your disposable income and assets. Disposable income refers to the amount of money you have left over after covering your essential living expenses such as rent/mortgage, food, and utilities. If your disposable income is less than �50 per month, you may be eligible for a DRO regardless of the amount of your debts.

How is the Maximum Debt Limit Calculated?

To determine your disposable income, you will need to complete a Statement of Affairs form with the assistance of a debt advisor. This form will ask for details of your income, expenses, and any assets you may have. Your disposable income will then be calculated by subtracting your essential living expenses from your total income. If your disposable income is more than �50 per month, you may not be eligible for a DRO.

What if My Debts Exceed the Maximum Limit?

If your debts exceed the maximum limit for a DRO, there are still other debt relief options available to you. These include an IVA, which is a legally-binding agreement with your creditors to pay back your debts over a designated period of time, and bankruptcy, which involves a court declaring you as insolvent and your assets may be used to pay off your debts. It's important to speak with a debt advisor to explore all of your options and determine the best course of action for your individual situation.

How Can I Avoid Exceeding the Maximum Debt Limit?

To avoid exceeding the maximum debt limit for a DRO, it's important to take action as soon as possible. Speak with a debt advisor to assess your situation and explore potential solutions. You can also consider taking steps to increase your disposable income, such as finding a side job or negotiating with your creditors for lower monthly payments. Additionally, creating a budget and sticking to it can also help you manage your debts and prevent them from spiraling out of control.

Conclusion

If you're struggling with overwhelming debt, a debt relief order may offer a viable solution. However, it's important to understand the maximum debt limit for a DRO and how it may impact your eligibility. By speaking with a debt advisor and taking steps to manage your debts, you can find financial relief and work towards a brighter financial future. Remember, no matter how difficult your situation may seem, there is always a way out and seeking help is the first step towards financial freedom.
 

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DebtReliefMagic.com and its affiliates are not debt relief companies, debt collectors, lenders, or creditors. DebtReliefMagic.com does not guarantee that debts enrolled in the partner program will be settled, lowered by a specific amount or percentage, settled in a specific time period, or that clients will be 'debt free' in a specific time period. DebtReliefMagic.com does not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice, or credit repair services. Not all debts are eligible for enrollment. It is essential to consult with a tax professional to discuss the tax consequences of settlement, and we recommend contacting a bankruptcy attorney for more information on bankruptcy. Please note that our services may not be available in all states and other restrictions may apply.


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