Gambling Debt Relief Order

• Gambling Debt Relief Order Application
• Help With Gambling Debt
• Bankruptcy And Gambling Debt
• Debt Relief Order Uk
• Gambling Debt Forgiveness

A reader, let’s call him Mr C, asked:

I have been in bad mental health and have in periods of illness suffered big losses due to online gambling. I used to earn £30,000, I now only work part-time, getting c £700 a month, and have moved back to my parents.

Gambling problems often make debt problems worse, and vice versa. Borrowing more money to pay for gambling can make your debts increase, while struggling to keep on top of your increasing debts can be a trigger for more gambling. We can help you with any debt problems that may have arisen from a gambling. Gambling debt, including debt incurred from casinos or charged on credit cards and loans, can be discharged in bankruptcy. About 10% of bankruptcy filings are due to gambling debt, and 20% (or more) of compulsive gamblers are forced to file for bankruptcy in order to discharge their debts.

I have debts of £27,000 with £1,000 a month repayments. Some debts are very new eg a £8,000 loan three months ago.

I am very unlikely to find a job with a good salary and would like to go to university to improve my chances – I am in my mid-twenties.

My parents have offered £10,000 if it would get me completely debt free. That is only about 40% of the debts. If that isn’t accepted would the next best option be a F&F IVA or bankruptcy?

I have very few assets and probably the only thing that would be taken away from me if I were to go bankrupt is my car (approx £1.5k). I have no real qualms about going bankrupt except that the gambling aspect would probably introduce a BRU.

A clean start sounds like a good idea

From what Mr C has said, he has been through a very difficult time and now has an unmanageable amount of debt. He has done some research and all of the options he is suggesting – a full and final settlement, a F&F IVA and bankruptcy – could give him a clean start, leaving his debts behind.

The stress of problem debt can make mental health issues worse, so it will be good to avoid debt hanging over him for many years while he tries to rebuild his future.

Offering partial settlements

A partial settlement is when your creditor agrees to accept less than the full amount to close the debt – it’s often called a Full & Final Settlement.

£10,000 may sound like a good offer because he has no chance of repaying these debts.

But that isn’t how his creditors may see it at the moment. Because he hasn’t missed any payments in the past, the chance of any creditors accepting a Full & Final settlement offer now isn’t good.

What about mental health problems?

If Mr C tells creditors about his mental health problems he should be treated sympathetically and should not be pushed to repay more than he can manage. That doesn’t mean the creditors will rush to write off his debts, but sometimes they may consider it.

If evidence about his mental health might encourage creditors to accept a F&F offer, he could ask his GP or another health professional to complete a DMHEF form to could send with the offer letters. GPs in England are no longer allowed to charge for doing this.

Mr C may find this daunting. One option would be to get help with it from his local Citizens Advice.

Or delaying offering full and final settlements?

The real problem with these F&Fs is it is simply too early. When the creditors realise he has a serious, long-term problem they will take an offer more seriously.

If he wants to do this, he could set up a debt management plan so he can make affordable payments to the creditors now. Then, in a year, he can write to all the creditors with the 40% offer and point out he is about to start uni, so the payments will be a token £1 a month for three years. At that point, there is a much better chance of many of his creditors – possibly all – accepting this offer. However, it isn’t guaranteed to work.

A F&F IVA

A full & final IVA is a variation on the standard Individual Voluntary Arrangement where he would just make a single payment – the £10,000 from his parents – and the creditors would vote to accept that. If it is approved, all debts will be included in it, even those who voted against or ignored it.

The biggest disadvantage is that it simply isn’t very likely to work at the moment – 75% of the creditors voting have to approve the IVA for it to go ahead. As Mr C borrowed £8000 just a few months ago, if only that creditor votes against, then the IVA would not be approved. The creditors would also get less than 40p in the pound as the IVA firm would deduct its fees first.

I can’t see that a F&F IVA has any advantage for Mr C over bankruptcy and it would cost a lot more.

Bankruptcy

The only immediate action he could take that is guaranteed to work is going bankrupt. That link gives you lots of information on the pros and cons of bankruptcy and what actually happens.

I think Mr C knows most of these, but this is a big decision and if he hasn’t already taken debt advice he should, see Good places for debt advice. Mr C mentions:

• he would be likely to lose his car. He may not care about this, but if he wanted to keep it, then his parents could buy it from him for its current value (use Parkers to get this) and this would give him some money for the bankruptcy fees.
• because of his gambling, he might get a BRU. But he may reasonably decide that a BRU wouldn’t affect him much if at all. It would make it harder to borrow money for some time after he is discharged, but that can even be regarded as a plus point, as without credit it will be harder to gamble.

Apart from those points, bankruptcy would seem to have a lot more advantages for Mr C than full an final settlements, whether made directly with the lenders or through an IVA:

• he wouldn’t need the £10,000 from his parents! He may need other help over the next few years and there could be better uses for this money;
• it would be quick, certain and under his control.

Other variations for other people

Here are some other options that could work for other people with large gambling debts, many of whom won’t have money available for large settlement offers;

• if you owe less than £20,000, are renting and have very little money each month to pay to your debts, look at a Debt Relief Order;
• with a house with equity, your choice is probably between an IVA and a DMP. I wouldn’t suggest an IVA is a good idea until you have been free of gambling for at least 6 months, preferably a year;
• making token payments won’t solve a debt problem, but it can give you time to sort out other problems in your life;
• with a good income, see if any of your debts can be challenged. That last loan of £8,000 sounds to me as though it could have been unaffordable for Mr C and the lender should have realised this. Read How to get a refund from payday loans – the same approach applies to all borrowing, not just payday loans – and “I borrowed 20k in two weeks” – a bipolar spending spree for an example. (Mr C could try this, but his debts are so large that it’s unlikely to make enough difference so bankruptcy is just the simpler approach.)

Debt relief orders (DROs) are a simplified, quicker and cheaper alternative to bankruptcy as an insolvency measure in the United Kingdom, which came into effect in England and Wales on 6 April 2009, and are also offered in Northern Ireland.^[1]

Debt relief orders are suitable for debtors who have relatively low liabilities, little surplus income and few assets; can (depending on eligibility) be a viable alternative to other insolvency measures, such as Individual Voluntary Arrangements (IVAs), and when bankruptcy would be disproportionate; and allow vulnerable people trapped in debt to have a fresh start.^[1]

It is possible to apply for a DRO without attending court and the fee is £90. The fee may be paid by installments prior to applying for the order.^[1]

Background[edit]

Debt relief orders were introduced under Chapter 4 of the Tribunals, Courts and Enforcement Act 2007,^[1] as a major amendment to the Insolvency Act 1986, and minor amendments to the Company Directors Disqualification Act 1986 and the Employment Rights Act 1996.^[2]

In Schedule 20 of the Tribunals, Courts and Enforcement Act 2007, the consequences of debt relief orders is outlined.

Consequences of the amendments to the Insolvency Act 1986 include:^[2][3]

• Bankruptcy or eligibility for a debt relief order could be determined by a third party intermediary;
• Debt relief orders were outlined as a voluntary process which third party mediators could not intermediary;
• Debt relief orders can be revoked if the £90 application fee is not paid;
• Individuals who successfully complete a DRO process are not eligible for Parliament for 12 months;
• Additional restrictions to individuals who complete a DRO process outlined;
• Individuals who are dead are exempt from DRO protections;
• A register of DROs established, can be inspected by the public;
• Punishments for abuse of DRO process for monetary gain of an individual and/or organisation outlined.

Consequences of the amendments to the Company Directors Disqualification Act 1986 include:^[2][4]

• An individual directly or indirectly promoting, establishing, or managing a company during the period of DRO restrictions is an offence (punishment defined as the same as for that offence under bankruptcy restrictions).

Consequences of the amendments to the Employment Rights Act 1996 include:^[2][5]

• An employer is defined as being insolvent during the period of DRO restrictions.

The Minimal Asset Protection (MAP) insolvency measure, introduced in Scotland under the Bankruptcy and Debt Advice (Scotland) Bill on 11 June 2013, shares similarities with DROs but has different associated benefits, risks, and fees.^[1][6][7] In particular, the application cost was reduced from £90 to £50 during the COVID-19 pandemic (until September 31st 2020) in response to increased financial insecurity.^[8]

Eligibility[edit]

Debt relief orders are intended to provide debt relief for people in England, Wales, and Northern Ireland if:^[1]

• the debtor is unable to pay his/her debts;
• the debtor's total unsecured liabilities (debt) must not exceed £20,000;^[9]
• the debtor's total gross assets must not exceed £1000 (this includes houses so homeowners will not be eligible; the debtor will usually be allowed to keep a car if it is worth less than £1000 or it has been adapted for them because they have a physical impairment that has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities;
• the debtor's disposable income, following deduction of normal household expenses, must not exceed £50 per month;
• the debtor must be domiciled in England or Wales, or in the last 3 years have been resident or carrying on business in England or Wales;
• the debtor must not have previously been subject to a DRO within the last 6 years;
• the debtor must not be involved in another formal insolvency procedure at the time of application for a DRO, such as:
  • an undischarged bankrupt;
  • a current individual voluntary arrangement;
  • A current bankruptcy restrictions order or undertaking;
  • A current debt relief restrictions order or undertaking;
  • An interim order;
  • A current pending debtor's bankruptcy petition in relation to the debtor but the debtor has not been referred to the DRO procedure by the court as a more suitable method of debt relief;
  • A current pending creditor's bankruptcy petition against the debtor but the debtor has not obtained the creditor's permission for entry into the DRO process.

Gambling Debt Relief Order Application

Application Process[edit]

A debt relief order is a form of insolvency, like bankruptcy, and will be subject to a public listing through the Insolvency Service website.^[1]

Help With Gambling Debt

Debt relief orders can only be completed by an approved intermediary and competent authorities. Approved intermediaries will be mainly experienced debt advisors attached to debt advice organisations such as Citizens Advice, StepChange Debt Charity or an AdviceUK member. The approved intermediary can review the persons information, make a determination that they are eligible and appropriate for a DRO and file the DRO application online. Approved intermediaries will not charge a fee for completing or submitting an application.^[1]

Organisations approved by the Insolvency Service as competent authorities are listed on the Insolvency Service web site, and include, Angel Advance, AdviceUK, Citizens Advice, StepChange Debt Charity, the Institute of Money Advisers, National Debtline, Payplan and Think Money.^[10]

Bankruptcy And Gambling Debt

Upon receipt of the application and payment of the fee, an Official Receiver may make the order, administratively, without the involvement of the court if it appears that the applicant meets the requirements.^[1]

If the Official Receiver becomes aware of information which means the debtor does not qualify for a DRO, the application will be refused. If this information comes to light after the DRO is made, the Official Receiver may revoke the DRO without reference to the Court. The effect of revoking a DRO will be to leave the debtor open to actions by his or her creditors. If a DRO is revoked the debtor cannot apply for another one within six years.^[11]

Outcomes[edit]

During the 12-month period that a debt relief order is active, the applicant will:^[1]

Debt Relief Order Uk

• Be protected from enforcement action by the creditors included in the application (bar certain creditors whose debts cannot be scheduled in the DRO and those creditors whose debts are included in the DRO but who have successfully obtained leave from the court to pursue their debts).
• Be free from those debts at the end of the period (normally 12 months from Order).
• Be obliged to provide information to and co-operate with the Official Receiver.
• Be expected to make arrangements to repay their creditors should their financial circumstances improve.

Certain activities by debtors subject to a DRO may result in an application to the Court for a Debt Relief Restrictions Order being refused. These include:

• Failing to keep records which account for a loss of property by the debtor, or by a business carried on by him, where the loss occurred in the period beginning two years before the application date for the debt relief order and ending with the date of the application for the debt relief restrictions order;
• Failing to produce records of that kind on demand by the official receiver;
• Entering into a transaction at an undervalue in the period beginning two years before the application date for the debt relief order and ending with the date of the determination of that application;
• Giving a preference in the period beginning two years before the application date for the debt relief order and ending with the date of the determination of that application;
• Making an excessive pension contribution;
• A failure to supply goods or services that were wholly or partly paid for;
• Trading at a time, before the date of the determination of the application for the debt relief order, when the debtor knew or ought to have known that he was himself to be unable to pay his debts;
• Incurring, before the date of the determination of the application for the debt relief order, a debt which the debtor had no reasonable expectation of being able to pay;
• Failing to account satisfactorily to the court or the official receiver for a loss of property or for an insufficiency of property to meet his debts;
• Carrying on any gambling, rash and hazardous speculation or unreasonable extravagance which may have materially contributed to or increased the extent of his inability to pay his debts before the application date for the debt relief order or which took place between that date and the date of the determination of the application for the debt relief order;
• Neglect of business affairs of a kind which may have materially contributed to or increased the extent of his inability to pay his debts;
• Fraud or fraudulent breach of trust;
• Failing to co-operate with the official receiver.

In addition certain more serious misconduct may result in criminal prosecution.

Gambling Debt Forgiveness

Data released in November 2014 shows the number of debt relief orders in London between 2009 and 2013 was much lower than the average for the rest of England. The study was produced by New Policy Institute and funded by Trust for London.^[12]

See also[edit]

• Trust Deeds (only available in Scotland)

External links[edit]

References[edit]

1. ^ ^abcdefghijConway, Lorraine (2019-11-11). 'Debt Relief Orders (Briefing Paper Number 4982)'(PDF). House of Commons Library – via UK Parliament.
2. ^ ^abcd'(Schedule 20) Debt relief orders: consequential amendments'. legislation.gov.uk. The National Archives. 2007-07-19.
3. ^'Insolvency Act 1986'. legislation.gov.uk. The National Archives. 1986-07-25.
4. ^'Company Directors Disqualification Act 1986 - Section 11: Undischarged Bankrupts'. legislation.gov.uk. The National Archives. 2016-11-30.
5. ^'Employment Rights Act 1996 - Part 12: Insolvency of Employers - Section 183: Insolvency'. legislation.gov.uk. The National Archives. 2009-02-24.
6. ^Bremner, Abigail (2013-09-19). 'Bankruptcy and Debt Advice (Scotland) Bill (SPICe Briefing)'(PDF). SPICe - The Information Centre – via parliament.scot.
7. ^'What Is The Minimal Asset Process And How Does It Work?'. Scottish Trust Deed. 2018-05-02. Retrieved 2020-09-04.
8. ^'Minimal Asset Process (MAP) Bankruptcy. StepChange Scotland'. www.stepchange.org. Retrieved 2020-09-04.
9. ^'The Insolvency Proceedings (Monetary Limits) (Amendment) Order 2015 (SI 2015 No. 26)'. legislation.gov.uk. Retrieved 2015-01-24.
10. ^'Debt Relief Orders - Competent Authorities'. bis.gov.uk. Archived from the original on 2011-09-26. Retrieved 2011-07-29.
11. ^'What effect will a Debt Relief Order have on me?'. debtadvisorycentre.co.uk. Retrieved 2012-07-24.
12. ^[1]Institute, Trust for London and New Policy. 'Debt relief orders - Poverty Indicators - London's Poverty Report'.