Repossession of the home becomes a realistic situation when people can no longer afford to make mortgage payments. When a property is voluntarily surrendered, the lender will ask the mortgage holder to sign documents called a Deed of Acknowledgement.
Within this paperwork is a clause the can make the individual liable for the shortfall even during debt management attempts like bankruptcy. However, surrendering the home can make it easier, not more difficult, to qualify for a Debt Relief Order (DRO).
A DRO is a type of insolvency designed as a simplified form of bankruptcy for people who are less than £15,000 in debt and have few assets. It freezes debts for a 12-month period, during which creditors may not recover money without receiving court permission.
When the DRO period ends, the individual is freed of the covered debts, making a fresh start possible. A DRO is issued by the Official Receiver, who is an officer of the bankruptcy court. An authorized debt advisor must help a debtor complete the DRO paperwork and will submit it on behalf of the individual.
To qualify, the individual may not be a homeowner and may not have assets valued at more than £300 in total
A vehicle owned by the individual may not be worth more than £1,000. The Official Receiver will determine the value of the vehicle. Antiques, savings, shares, stocks, property, and electrical goods are among the other assets considered under a DRO. Income is considered separately and most be less than £50 after household living expenses.
DRO applicants must have worked or lived in Wales or England within the previous three years and must not have applied for a DRO within the prior six years. It currently costs £90 to file a DRO and if the order is approved, the debtor is subject to certain restrictions. These include not being able to act as a company director or borrow more than £500 without informing the lender of the DRO.[doyouneed01]
A DRO may be canceled if the financial situation of the covered individual improves or the person fails to cooperate with the Official Receiver. A DRO appears on the Individual Insolvency Register until three months after its conclusion. It will remain on the credit record for six years, which can make it difficult for the covered individual to obtain new credit.
Private companies and agencies including National Debtline and Citizens Advice Bureau provide free debt management advice and help locating authorized debt advisors. Consumers can find out whether they qualify for DRO and get help with the documents involved. Once the DRO application fee is paid in full, the Official Receiver will review the information and make a decision.
Letting go of the home can be a very painful decision. However, it can also open the door to debt management solutions like DROs, which help consumers get rid of their unsecured debt. After the repossession process concludes, the individual should contact a debt advisor to determine if a DRO is an option.