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Debt Relief Order (DRO)

A Debt Relief Order (DRO) is a debt solution for those who have very little when it comes to assets. For example, they don’t own a home or have valuables worth more than £2,000 and have less than £75 monthly disposable income. It acts as an alternative to bankruptcy for non-homeowners, offering effective debt relief.

What is debt relief?

Debt relief is when a solution is put in place – such as a Debt Relief Order – that relieves the person who owes money of their obligations to repay it. Insolvency solutions, such as Debt Relief Orders, IVAs (Individual Voluntary Arrangements) and bankruptcy are all examples of solutions that offer debt relief.

Debt Relief Orders offer the same type of debt relief as an IVA or bankruptcy but are only suitable for people who have no assets to use towards repaying their debts.

Qualifying for a Debt Relief Order

To be eligible for a DRO in England and Wales, you must:

  • have an unsecured debt level lower than £30,000
  • have less than £2,000 worth of assets, excluding essential household items, and if you have a vehicle it must be worth less than £2,000
  • have a monthly disposable income of under £75
  • currently live in England or Wales, or have lived or worked in England and Wales in the last three years
  • if you live in Northern Ireland, you must have your DRO processed in Northern Ireland. You will not be eligible for your DRO to be processed in England or Wales.

    If you meet some, but not all of this criteria, contact our specialist advisors who will be able to advise you on alternative solutions.

    Applying for a Debt Relief Order

    A Debt Relief Order is an alternative to bankruptcy, but carries the same weight. It can impact your credit rating, making it difficult to obtain credit once the initial process is complete and could have implications on your employment if you work in the financial sector.

    This solution can only be administered by an officially approved company. For your protection, ensure the company you use is accredited and a member of the Financial Conduct Authority. They will file your application for you after receiving all the important information they need from you.

    A Debt Relief Order takes 12 months to process and, at the end of this period, you’ll be discharged.

    When you enter a Debt Relief Order, those first 12 months are referred to as the moratorium, which means certain restrictions are placed upon you and you won’t be able to:

    • Get credit for £500 or more without telling the lender you have a DRO
    • Carry on in a business in a different name from the one under which you were given the DRO, unless you tell everyone you do business with the name in which you got the DRO
    • Be involved with promoting, managing or setting up a Limited Company without permission from the court
    • Act as a Company Director without permission from the court
    • Tax and national insurance underpayments
    • Credit cards
    • Overdrafts
    • Personal loans
    • Benefit overpayments

    You can access our in-depth guide on bankruptcy offences and restrictions.

    What kind of debt can be included in a Debt Relief Order?

    It’s important to note what debts can be included in your Debt Relief Order, these include:

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

    Does a Debt Relief Order show up on your credit report?

    Yes, a Debt Relief Order will be listed on your credit report and will impact your score.

    A Debt Relief Order will make obtaining credit difficult, even when the 12-month period is over, as it will remain listed on your credit report for six years from the date it was created.

    It’s best to keep a close eye on your credit rating – our guide on rebuilding this has lots of information about where to start– to ensure you’re clear where you stand and what you need to do about it.

    Is a Debt Relief Order right for you?

    You should explore all other options available to you before settling on a Debt Relief Order. Here we take a look at the pros and cons of this debt solution:

    Pros of a debt relief order

    Cons of a debt relief order

    Takes just 12 months to process.

    You’ll have to abide by a set of restrictions, and breaking these will have serious consequences. These can include a fine, an extension of the restrictions up to 15 years or even prison.

    You’ll no longer have to deal with your creditors and they will no longer be able to pursue you, legally.

    Your credit rating will be severely impacted and your ability to get credit will be affected for six years, from the date the Debt Relief Order is created.

    Your debts are written off after 12 months.

    You may struggle to obtain a new rental agreement if your landlord or letting agency performs a credit check on you with a Debt Relief Order in place.

    You can keep your assets if they are worth less than £2,000.

    You’ll be listed on the Public Insolvency Register or Individual Insolvency Register, which can also be viewed by creditors.

    If you’re already in a rental agreement, it’s unlikely the Debt Relief Order will affect this so you can continue living in your current home.

    If you work in certain financial sectors, you may not be able to continue working in these roles.

    What next?

    If you’re considering a Debt Relief Order, speak to a member of our expert team here at PayPlan – via phone on 0800 316 1833 or live chat – who can advise if it’s the right choice for you and assist you with getting set up.

    More About Bankruptcy

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