Personal debt of up to £30k could be written off

LVDROs will provide people trapped in debt to have a fresh start, said Economic Development in its policy letter.

Draft proposals for a means of providing relief for those who owed up to £25,000 went out to consultation in 2016 but nothing came of the plans at that time.

The current proposals would cover up to £30,000 of unsecured debt, subject to the person and the debt involved meeting eligibility criteria.

Among the criteria for debtors would be having no more than £5,000 in the value of their assets (excluding a motor vehicle with a value of up to £2,000) and having a disposable income of no more than £100 a month after the payment of tax, social insurance, and reasonable household expenses.

Debts that would not be covered would include secured debts, court fines and child maintenance.

Orders would be issued by a Jurat and a private register of those on the scheme maintained by the Greffier.

Citizens’ Advice Guernsey CEO Kerry Ciotti said the organisation was pleased with the proposals.

‘We’ve been waiting for this for a long time,’ she said.

‘This is not about clients being irresponsible, but when people get to that stage where they’re in debt and they don’t have the means, they need to be able to find a way forwards.’

During 2021 Citizens’ Advice dealt with 1,131 debt and money issues and 52 clients had received a full financial restitution negotiation service on £3,587,380 of unaffordable debt, where the charity acted as an intermediary between the client and the client’s creditors to negotiate a repayment plan.

The most common debts were secured and unsecured loans, with credit/store cards, family loans and income tax also being common.

Almost 30% of indebtedness was due to job loss or business failure while nearly a quarter was down to health issues and 15% to relationship breakdown.

The charity’s John Stuart represented it on an industry-led working group established by Economic Development in 2019.

He said the restitution negotiation service will continue if and when LVDROs comes into effect.

The working group will continue, however, and look at bringing in a mechanism to help people with larger debts, akin to the Individual Voluntary Arrangement scheme in the UK.

Beyond that, it could investigate having a mechanism in Guernsey whereby an individual can be declared bankrupt, once a new lending, credit and finance law comes into effect.

Low Value Debt Relief Order criteria

To be eligible applicants must:

. have no more than £30,000 of qualifying debt;

. be at least 18 years old;

. ordinarily have been a Guernsey resident for at least two years;

. not had a LVDRO issued, or been the subject of any personal insolvency proceedings, in Guernsey or elsewhere, in the last five years;

. have no more than £5,000 in value of assets (excluding a motor vehicle with a value of up to £2,000)

. have a disposable income of no more than £100 a month after the payment of tax, social insurance, and reasonable household expenses

n have acted in good faith.

Debts to be excluded from the scheme would be:

. secured debts;

. criminal fines;

. child maintenance;

. damages for negligence, nuisance, or a breach of duty payable by way of court order;

. any other category prescribed by Economic Development, by regulation, as being excluded.