# Recommendation: Two new processes: Debt Settlement Arrangement and Debt Relief Order



## Brendan Burgess (1 Mar 2011)

The  Debt Enforcement Office would include a small independent unit, the  Debt Settlement Office, which would license a panel of Personal  Insolvency Trustees, appointed after a public tendering procedure and  subject to statutory standards. A Personal Insolvency Trustee would  manage a _Debt Settlement Arrangement_, which would be for debtors  who “can pay” at least some of their debt. In a Debt Settlement  Arrangement, creditors and a debtor would make a legally binding  commitment in which the debtor would repay an agreed amount of personal  debt to creditors over a period of up to 5 years. At the end of this,  the debt would be deemed to be repaid in full. The Debt Settlement  Arrangement process would only be available to a person who acts in good  faith and makes full disclosure of all their assets; if they do not,  the process will automatically end and the debtor could be prosecuted.  If the debtor complies with the Debt Settlement Agreement, at the end of  it he or she would be able to make a “fresh start” without having any  damage to their personal credit rating.
For debtors whose  circumstances are so bad that they have virtually no prospect of paying  back any debt (the “can’t pay” debtor or “no assets, no income”  situation), the Debt Enforcement Office, with the assistance of the  Money Advice and Budgeting Service (MABS), could make a _Debt Relief Order_.  This would be a once-off Order, and would simply recognise the reality  of an indebtedness that cannot be repaid within a foreseeable time  period. Unless circumstances changed dramatically for the debtor, the  effect of this Order is also that the debt is deemed to be discharged.


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