The removal of debt problems from the list of issues that qualify for legal aid will lead to a substantial drop in the number of Debt Relief Orders, or DROs, approved for UK debtors, according to Labour Lords.
Writing for the Labour Party’s dedicated House of Lords website, Lord Wilf Stevenson of Balmacara explains that DROs are currently granted only when applied for by “an approved intermediary working for organisations which have to be approved by the Insolvency Service“.
Lord Stevenson says the CAB processed 70% of the 29,000 DROs made in 2011, but will not be able to continue to do so without the support of legal aid.
The ‘Catch 22’ of inadvertently ending access to DROs is not the only issue, however, as he notes the complexities that typically surround unpaid debts, which may have become overdue or unmanageable for any one of a variety of reasons.
Illness and redundancy can interrupt an individual’s earnings, leaving them unable to maintain the level of income needed to service their debt, while relationship upheavals can also worsen debt problems, particularly where there is joint liability for a loan.
“If the legal aid funding is cut, there will probably not be any authorised intermediaries, and the DRO scheme will be neutered,” Lord Stevenson writes. “Is this really what ministers intend? This simply cannot be right.”