Thousands urged to look out for letters about £90 refunds following major debt rule change
THOUSANDS have been urged to claim £90 refunds after a major debt rule change last year.
Almost 4,000 people who took out Debt Relief Orders (DRO) before April 2024 are owed cash.
Previously, anyone taking a DRO out had to pay a £90 fee, but this was scrapped in April 2024.
However, the Insolvency Service has found around 5,000 people who took one out before this date and since 2016 didn't finish the application process and are owed the £90 back.
The agency has written to the cohort due a refund with around 1,000 having responded and receiving the money they're owed.
But there are still roughly 4,000 who have not and need to apply to get their hands on the £90.
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The first batch of letters to those eligible for a refund was sent around two months ago, with another round being posted "in the coming days".
It is understood some people may receive emails telling them they're eligible for the refund as well.
Caroline Shanahan, senior leader in the Personal Insolvency Team at the Insolvency Service, said: "In some cases, people may have changed their email address or moved home, meaning we do not have their current details to contact them.
"Those people can still apply for a refund if they paid towards a debt relief order that was not submitted, they just need to get in touch and let us know."
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If you are due a refund, you should email [email protected].
You can request the £90 payment to be paid directly into your bank or building society account or via cheque.
You must include the following details in your email to the Insolvency Service:
- Debt Relief Order application number (if known)
- Your name
- Your address
- Your telephone number
- Bank/building society Name
- Account name (as shown on bank statement)
- Bank account number (full 8 numbers)
- Bank sort code (full 6 numbers)
- Building Society roll number (if applicable)
If your contact details have changed since making the DRO application, include your previous name and address alongside your current details.
If a charity or third party paid for the DRO on your behalf, provide the details of the organisation that made it.
How to cut the cost of your debt
IF you're in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
You can also write to the Insolvency Service with any questions at: The Insolvency Service DRO Team, C/O Met Office, Fitzroy Road, Exeter, EX1 3PB.
What is a Debt Relief Order (DRO)?
A DRO freezes your debts for 12 months and bans creditors from contacting you about any money owed during that window - known as a moratorium.
If there is no improvement in your financial situation after 12 months, the debt is wiped completely.
You qualify for a DRO if you have debt worth less than £50,000 but won't be eligible if you have assets worth more than £2,000, or a car or motorbike worth £4,000 or more.
You also must have £75 a month or less spare income after paying for bills and other essentials.
You can use a DRO for the following debts:
- credit cards, overdrafts and loans
- arrears with rent*, utility bills, telephone bills, council tax and income tax
- benefits overpayments
- hire purchase or conditional sale agreements
- buy now - pay later agreements
- bills for services like vets or solicitors
- debts you owe to friends and family
- business debts
You can't use a DRO to pay off the following debts:
- magistrates court fines and confiscation orders relating to criminal activity
- child support and maintenance
- student loans
- social fund loans
- compensation for death and injury
You can also only apply for a DRO if you have lived in England or Wales for the last three years and have not taken one out in the last six years.
However, you may still qualify if you submitted a request for a DRO in the last six years but it was cancelled.
You can apply for a DRO through an approved debt adviser which you can find .
If you live in Scotland or Northern Ireland you won't qualify for a DRO, but should speak to a debt adviser about what to do.
You also can't take out a DRO if you have an IVA in place or if you're going through bankruptcy.
Bear in mind that if you do take out a DRO, it stays on your credit file for up to six years after the date it was approved.
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This can make it harder to get approved for loans, credit cards and even a mortgage.
Meanwhile, if your circumstances change, such as you receiving a pay rise, the DRO may be cancelled.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Facebook group to share your tips and stories