When a debt relief order is revoked, it is treated as if it had never been made.
Summary
The County Court held that the effect of revocation of a debt relief order (DRO) was to rescind, nullify or cancel it, meaning that it never existed. Revocation does not prevent a new DRO being made.
Background
Mr Curr applied for a DRO which was approved on 15 August 2018. On the same date that his application was submitted, one of his creditors, London and Country Mortgages Ltd, presented a bankruptcy petition to Salisbury County Court. The creditor objected to the making of the DRO.
Part 1 of Schedule 4ZA to The Insolvency Act 1986 sets out the conditions that need to be met before making a DRO. One of the conditions is that a bankruptcy petition should not have been presented or, if a bankruptcy petition has been presented, then the person presenting the petition has consented to the DRO.
The Official Receiver determined that the conditions to make a DRO had not been met. The Official Receiver revoked the DRO.
New debt relief order application
Mr Curr made a new DRO application. One of the conditions that must be met before a DRO is made is found in Schedule 4ZA(5) Insolvency Act 1986: “A debt relief order has not been made in relation to the debtor in the period of six years ending with the determination date.”
The Official Receiver declined the application on the ground that a DRO had already been made within six years of the previous DRO. The court considered the meaning of “revoked” and how this affected a debtor’s eligibility for a DRO within six years of a previous DRO being approved but later revoked.
In other words, had a DRO “been made” in the last six years?
The court's decision
The court held that the meaning of the word “revoked” in s251L Insolvency Act 1986 was to “rescind, nullify or cancel” meaning that it “never did exist”. A DRO had not “been made” within the six years prior to Curr’s new DRO application. Mr Curr met the eligibility criteria for a DRO in Schedule 4ZA (5) Insolvency Act 1986.
The court quashed the Official Receiver’s decision to decline the application for a DRO and gave directions for it to be reconsidered.
Comments
In the September 2021 DRO Newsletter, the Insolvency Service confirmed that it will follow the decision of the court in this case. It also stated the following:
For practical purposes, if a client has been subject to a DRO within the last 6 years that was revoked, they can apply for a (further) DRO as they did not receive the benefit of the original DRO as they remained responsible to repay their debts.
This does not mean that the application will automatically be approved as the DRO team will need to consider the reason for the revocation decision and when this took place in relation to the submission of the new application.
It should be noted that it is only a County Court decision. If challenged, it would not be legally binding on other County Court judges.
Experian has confirmed that it will remove the DRO from a credit report after a DRO has been revoked.