For debtors with limited liabilities, little surplus income and minimal gross assets, the new Debt Relief Order (DRO) is a further tool to consider in managing their debts. DROs, which came into force on 6 April 2009, are aimed at those who find they are unable to pay off their debts within a reasonable time but for whom other forms of debt relief, such as bankruptcy or Individual Voluntary Arrangements, are unavailable, or perhaps unaffordable.

What are the criteria for a DRO?

A DRO can be applied for where the debtor:

When a company goes into administration, time does not stop running against its creditors' claims for the purposes of the Limitation Act 1980. This is different to where a company goes into liquidation as time does then stop running. The effect there is that the claim stays live whereas in an administration, once the limitation period has expired, the claim is time-barred.

Where the entirety of a debt is not included in an agreement to settle, a creditor can continue to prove in a bankruptcy for the balance.

Gowling WLG's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

A party cannot appeal a decision made in bankruptcy proceedings by reason only of a personal interest in the outcome. An economic interest is a pre-requisite.

This was confirmed by the court in Sands and another v Monem and another, in which the bankrupt had transferred the interest in his home to his wife before being made bankrupt. The transfer was made allegedly in order to settle a debt, although this was not reflected in the documentation. That transfer was successfully set aside as a preference by the bankrupt's trustee.

Where a debtor's assets exceed his liabilities, the onus is on the debtor to prove he can not pay his debts if a creditor seeks to annul the bankruptcy order.

In Paulin v Paulin and another, the defendant petitioned for his own bankruptcy claiming he was unable to pay his debts. The claimant applied for the order to be annulled claiming the defendant could afford to pay his debts and was deliberately attempting to defeat her claims in the matrimonial proceedings.

Restrictive covenant - if in doubt, lender should be notified; the costs risk of insolvency proceedings; interim payments; service of claim form; Wragge & Co's banking and finance experts bring you the latest on the cases and issues affecting the lending industry.

Restrictive covenant - if in doubt, lender should be notified

This article was written by Greg Standing, partner in Wragge & Co LLP's finance, insolvency, recoveries and sales team and published in the July issue of Motor Finance.

When a claimant discontinues its claim, the usual position is that it has to pay the defendant's reasonable legal costs. This is the general presumption under the Civil Procedure Rules and applies unless there is good reason for it not to.

An intervening bankruptcy will not defeat a charging order where the bankruptcy was entered into in an attempt to frustrate the charge.