A debt relief order (DRO) is a formal debt relief option to help repay your debts if you have few assets and a low debt level. DROs were designed specifically for those with less than £20,000 worth of debt, less than £1,000 in assets (including your car), and less than £50 spare income after paying for your essentials.
If successful, all payments will be frozen for 12 months in order for you to improve your financial situation; if not, your debts will be written after this time.
Pros of a Debt Relief Order
- You are usually discharged from your debts after 12 months.
- Can be a ‘low-cost bankruptcy’.
- Creditors must stop chasing you for payment.
Cons of Debt Relief Order
- Restricts your future borrowing.
- Not applicable for home owners.
- Can no longer be the director of a company.
- May have to tell your bank or building society when opening a new account.
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Debt Relief Order FAQs
If for any reason your application for a debt relief order is refused, you will be given a written reason properly explaining why. However, a few of the main reasons are:
- You don’t meet the criteria.
- It is believed you haven’t provided all of the information needed.
- You didn’t reply with necessary information when asked.
There are several situations in which a debt relief order can be stopped while currently in place, these include:
- An increase in you income. Leaving you with more than £50 per month after expenses.
- You left out information about debt, assets or income.
- You ignore any restrictions put in place.
- You lied in order to get the DRO.
Alternatives to a Debt relief Order
Individual Voluntary Arrangement (IVA)
An individual voluntary arrangement (IVA) is a legal procedure for people in financial difficulties with unsecured debts. It is a legal agreement between you and your creditors to only pay what you can actually afford to pay off your debts.