Debt Relief Order (DRO)

What is a Debt Relief Order?

A Debt Relief Order (DRO) is a solution for managing debt if you can’t afford payments, or can only afford a small amount each month.  

A DRO will allow you to stop making payments on your debts for 12 months, subject to your eligibility. After one year, if your circumstances don’t change, your debts will be written off.

How does a DRO work?

We’ll discuss the solutions available to you, and if our recommendation is for a DRO, and you decide to go ahead, we’ll pass you through to either our in-house DRO team or one of our partners, such as Citizens Advice or Financial Wellness Group.

If you’re eligible for a DRO, you’ll need to speak with an approved intermediary and provide them with a copy of who you owe money to, how much you owe, details of your possessions and a copy of your budget.

You won’t need to attend court to apply for your DRO, and your approved intermediary will submit your application.

You won’t have to make any payments into your DRO, which will last for 12 months. It’ll be managed by The Insolvency Service, and you’ll need to keep them updated throughout your DRO.

If your situation improves and you no longer meet the criteria, your DRO may be revoked, meaning you’d be liable for your debts, plus any accrued interest and charges.

Protection from creditors

• If your DRO is approved, your creditors can’t take legal action to recover any of the debts included, they must also freeze interest and charges and stop chasing you for repayments.

No repayments needed

• You won’t need to make any payments during the 12-month period of your DRO, allowing you to focus on meeting your essential living expenses.

Debt write-off at completion

• After one year, providing your circumstances haven’t changed, all your qualifying debts will be written off, and you’ll no longer be liable for them

Am I eligible for a DRO?

A DRO could be an option for you if:

• You have £75 or less disposable income: Once all your expenses are paid, if you’re left with less than £75 a month, it means you‘re unlikely to be able to make a significant contribution to paying off your debts through another solution.
• You owe £50,000 or less: When you total up everything you owe, including any debts that may be in a joint name with a partner or family member.
• Your car is worth less than £4,000: If your current vehicle is valued at under £4,000, you’ll get to keep it in a DRO. Entering a DRO can break the terms of some finance agreements, so it’s important to check before submitting your application.
• You don’t own a property: You won’t be eligible for a DRO if you’re a homeowner or named on a mortgage.
• You don’t have any other assets totalling more than £2,000 combined: This doesn’t include essential household items.

Note: A DRO is available if you live in England, Wales, and Northern Ireland. You may be eligible for a Minimal Asset Process (MAP) if you live in Scotland.

What are the pros and cons of a DRO?

Benefits of a DRO

• Legal Protection: Creditors can’t contact you, charge interest, or take legal action on any debts included in a DRO.
• Debt Write-Off: At the end of the 12-month DRO period, any remaining qualifying unsecured debts included are written off.
• Affordable Process: There’s no application fee to apply for a DRO.
• Simple Management: Once approved, you won’t need to repay the qualifying debts included.

Things to consider

• There’s no flexibility when it comes to income changes. This means if your income increases, or your financial situation improves, during the DRO period, it may fail, and your creditors may resume action.
• If you expect there to be changes to your income or situation over the next 12 months, a different debt solution may be more suitable.
• Your credit rating will be impacted for six years from the start of the DRO, which could make future borrowing more difficult.
• Whilst in the DRO, you’ll need permission to take out any additional credit over £500, and will need to disclose to the lender that you’re in a DRO.
• If you fail to meet the terms of the DRO, you could face bankruptcy.
• There will be restrictions on your expenditure in a DRO, and if your budget exceeds those, you may no longer be eligible.

We’re here to help you understand all your options and guide you toward the best solution for your situation.

What debts can be included in a DRO?

A DRO doesn’t have a maximum limit on the number of accounts involved. It can include certain unsecured debts like:

• Rent arrears
• Utility bills
• Council tax arrears
• Tax and national insurance underpayments
• Credit cards
• Overdrafts
• Personal loans

Debts like student loans, court fines, and child maintenance payments can’t be included in a DRO and must still be paid directly. These should be treated as priority payments within the budget you work to.

If you want to check if your debts can be included in a DRO application, click here [Link] to see which debts can and can’t be included in an IVA.

Why Choose Us?

• 100,000+ people received free, confidential debt advice last year

Our knowledgeable team is ready to support you throughout the debt advice process, ensuring you find the best solution tailored to your needs.

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FAQs

Want to know more? We’ve answered some of the most common questions about DROs here.

Can a Debt Relief Order stop bailiffs?

Yes, a Debt Relief Order (DRO) can stop bailiffs, but only from taking control of goods for debts included in the DRO. However, if bailiffs have already taken control of goods, or if there’s a controlled goods agreement (CGA)in place, a DRO may not stop them.

It’s important to discuss your situation with your debt advisor to ensure all steps are taken to protect you.

How will my credit score be affected by a DRO?

A Debt Relief Order (DRO) will appear on your credit file for six years from the date it’s approved. This means you could find it harder to borrow or be offered higher interest rates if you apply for credit cards, loans, mortgages or other credit in future.

Do I need to stick to a budget in a DRO?

Yes, our team will work with you to create a budget based on your current circumstances.

You can use this to help you complete your DRO application.

Your budget must be realistic and sustainable, and cover all essential household living costs.

The DRO intermediary will discuss with you, prior to submission, any areas of your essential living costs that the Official Receiver may consider high or low to ensure that your budget is realistic.

The Official Receiver has budget guidelines they consider when approving or declining a DRO application.

If your situation changes after you enter a DRO, including your income or expenses, you’ll need to notify the Official Receiver as soon as possible.