Pension holders given cheaper option to bankruptcy

The government plans to allow people who hold pensions to access debt relief orders (DROs), which provide a cheaper alternative to bankruptcy.

Since April 2009, people who could not afford to pay £700 to go bankrupt but had no assets to give to creditors could access DROs, which cost around £90.

Previously, pensions counted as assets, but the government plans to change this definition to pensions as many people with very small pension pots which they could not access for several years were excluded.

"This brings DROs into line with bankruptcy where debtors are able to keep their approved pensions, and will provide welcome assistance to many of the most vulnerable," says Edward Davey, minister for employment relations, consumer and postal affairs.

The changes will come into effect in April 2011.