3.1 Alternatives to bky

Question 1

What debt are excluded in a DRO?

Answer 1

Exclusion of certain debts applies

▪ Criminal penalties / fines – SAME AS BANKRUPTCY
▪ Student Loans – SAME AS BANKRUPTCY

▪ Any liability to pay damages
▪ Lump sums in family proceedings

Question 2

What are the criteria for a DRO?

Answer 2

▪ Domiciled in England or Wales, or for the last three years have been resident
or carrying on a business
▪ Not be in any other formal insolvency procedure at the time of the
application (bankruptcy or IVA)
▪ No pending bankruptcy petition / application
▪ Must declare there have been no transactions at an undervalue or
preferences in the two years preceding the application
▪ Not have been subject to a DRO in the previous six years

Question 3

How long do notified creditors have to object to a DRO?

Answer 3

30 days (usually on grounds that debtor did not qualify)

Question 4

When can an OR revoke a DRO?

Answer 4

on grounds that:
▪ any information supplied by the debtor was incomplete, incorrect or
otherwise misleading;
▪ the debtor has failed to notify the OR of income or assets during the DRO
period
▪ a bankruptcy order has been made in relation to the debtor; or
▪ the debtor has or intends to make an IVA proposal
▪ the debts specified in the order were not qualifying debts
▪ the eligibility conditions were not in fact met

Question 5

How much does a county court administration order cost?

Answer 5

No up front fee, court deducts 10% of payments made.

Question 6

What is a county court administration order?

Answer 6

a method of repaying judgement debts over
time, with court protection - usually payment in full

Question 7

What are the criteria for a county court administration order?

Answer 7

debtor has a county court or High Court judgment they cannot pay in full AND at least one other creditor

▪ The debts to be included in the order must be less than £5,000

▪ If less than payment in full is achievable within a reasonable period,
then a ‘composition order’ can be applied for at the same time

Question 8

What is process for a CCAO?

Answer 8

▪ The debtor applies to their local county court
▪ Giving details of assets, liabilities, income and expenditure
▪ And making an offer of repayment
▪ Court notifies creditors that an application has been made
▪ Creditors have 16 DAYS in which to make objections or ask to be left out of the
administration order
▪ Priority creditors will want to make separate arrangements
▪ If no objections are received within the time, and the court is happy with the offer,
the order will be made without a court hearing
▪ If there are objections and/or the court is not satisfied with the amount, there will
be a hearing

Question 9

Do creditors have to halt interest in a debt management plan, or accept a lesser amount?

Answer 9

NO

Question 10

What is the period of a Breathing Space Moratorium?

Answer 10

60 days

Question 11

What is the period for a Mental Health Crisis Moratorium?

Answer 11

Treatment period plus 30 days

▪ MHCM last until:
▪ 30 days after end of treatment; or
▪ 30 days from the DAP making contact with no response; or
▪ DAP deciding to cancel MHCM; or
▪ The debtor dies

Question 12

What are the criteria for Breathing Space Moratorium?

Answer 12

▪ Debtor domicile or ordinarily resident in England & Wales
▪ No prior BSM in preceding 12 months
▪ Not in an individual voluntary arrangement, debt relief order, or an
undischarged bankrupt;
▪ Unlikely to be able to pay some or all of debts as they fall due
▪ i.e. prospective insolvency on a cashflow basis
▪ At least one “qualifying debt”
▪ Appropriate in the view of a Debt Advice Provider (DAP)

Question 13

What are the criteria for Mental Health Crisis Moratorium?

Answer 13

Criteria as per BSM, except that:

▪ Application via DAP by debtor OR a care professional
▪ Plus: evidence of mental health crisis treatment

▪ DAP (debt advice provider) must check qualification with reference to a credit reference agency

Question 14

What are non eligible debts for a Moratorium?

Answer 14

*Business debts if VAT registered
*Partnership debts
Secured debts
Social fund/ crisis loans, universal credit
Student loans
Fraud or breach of trust
Damages for death/ personal injury
Criminal fines
Confiscation orders
Child maintenance

Question 15

What is the process for application for a Breathing Space/ Mental Health moratorium?

Answer 15

Debtor (or medical professional/ carer) applies to Debt Advice Provider.

DAP considers application and if satisfied notifies INSS.

INSS adds to the Register (NOT PUBLIC) & notifies creditors

Question 16

When must debt advice professional conduct a review of the moratorium?

Answer 16

midway review at 25-35 days

Question 17

What are the restrictions on a person subject to a moratorium?

Answer 17

Can’t obtain credit in excess of £500

Question 18

What is the impact of a Breathing Space moratorium on creditors?

Answer 18

▪ In relation to qualifying debts, interest, fees and charges are frozen
▪ Moratorium prevents:
▪ Taking steps to collect debts (including any contact with the debtor)
▪ Enforcing a judgements
▪ Selling or taking possession of the debtor’s goods
▪ Commencing or continuing legal proceedings
▪ Limitation / enforcement periods which end during or within 8
weeks of the end of a moratorium are extended by 8 weeks

Creditors also have an obligation to notify any agents, courts etc

Question 19

How can creditors in a moratorium request a review?

Answer 19

Request a review within 20 DAYS
▪ 1) Unfair prejudice
▪ 2) Material irregularity:
▪ Eligibility criteria
▪ Qualification of debts
▪ Solvency
▪ DAP must review within 35 DAYS
▪ Must cancel moratorium in the event of unfair prejudice or material irregularity
▪ Not required to cancel if DAP considers cancellation is unfair or unreasonable
▪ Cancellation may be in relation to some or all of the debts

If dissatisfied can apply to court with 50 DAYS

Question 20

What happens if creditor applies to court for permission to take enforcement action?

Answer 20

Discretion to determine “as it thinks fit”, subject to
▪ It being reasonable for the creditor to do so
▪ Not detrimental to the debtor
▪ Does not significantly undermine the protections of the moratorium
▪ Cannot include requiring the debtor to pay interest, charges or
penalties