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 £30,000 worth of debt, less than £2,000 in assets (including your car (up to a value of £2,000)), and less than £75 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 off after this time.
Please Note: Debt Assist UK only provide debt advice; we do not directly provide any financial solutions ourselves. We will talk you through your available options and if appropriate, we can offer you a no-obligation referral to a regulated debt solution provider, from whom we may receive a referral fee. Some debt solutions involve fees to you – these fees may differ based on the circumstances of your individual situation, but will always be explained to you by your chosen solution provider in writing before you decide to take up their service(s).
Subject to Parliamentary approval, new Debt Relief Order rules start on 29 June 2021.
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
- Your credit rating will be negatively affected.
- Your details will appear on the insolvency register.
- 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
What debts does a Debt Relief Order cover?
Only certain debts, known as qualifying debts, can be included in a DRO. They include:
- Credit cards, loans, and overdrafts
- Arrears with rent, council tax, utility bills, income tax, and telephone bills
- Benefits overpayments
- Hire purchase and conditional sale agreements
- Buy now/pay later agreements
- Bills for professional services such as solicitors or vets
- Debts owed to family or friends
- Business debts
Am I eligible for a Debt Relief Order?
You should qualify for a DRO if all of the following apply:
- You can’t pay your debts
- You don’t owe more than £30,000
- You don’t own your own home
- You have no more than £75 leftover each month once after paying your usual household expenses
- Your assets are worth no more than £2,000. Some assets such as basic household items or tools needed to do your job aren’t taken into account.
- You do not own a car worth more than £2,000, unless it’s been specially adapted due to a disability.
- You’ve not had a DRO in the last six years.
- You have lived, owned property, or worked in either England or Wales within the last three years
To qualify, you must also not be going through another insolvency procedure, including an IVA or bankruptcy. However, if a creditor has asked a court to make you bankrupt, you can ask them for permission to apply for a DRO instead.
How do I apply for a Debt Relief Order?
You can’t apply for a DRO yourself. If you think you’re eligible, you’ll need to talk to you’ll need to speak to a special DRO adviser. They will be able to help you complete your application and explain what information must be included. The application will be sent to an official receiver – an officer of the bankruptcy court who will determine if the DRO should be granted.
You’ll need to tell the advisor if, within the last two years, you have:
- Paid some of your creditors but not others
- Given away assets
- Sold any of your assets for less than their value
If any of these apply to you, your application may be refused. All the facts of your case will be carefully considered before a final decision is made.
A Debt Relief Order can help you repay your debts if you have a low debt level and few assets. You’ll be given time to improve your financial situation before being asked to start making payments again.