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Debt Relief Order

Debt Relief Order (DRO)

A debt relief order is a way to have your debts written off if you have a relatively low level of debt and have few assets. DROs are available in England, Wales and Northern Ireland. Debt relief orders are not available if you live in Scotland.
A DRO freezes your debt repayments and interest for 12 months. If your financial situation hasn’t changed at the end of this period then all of the debts included will be written off. If your situation improves within the 12 months, the DRO will end and you will have to either pay off your unsecured debts and any interest that has built up over that period or find an alternative debt solution.
A debt relief order is an alternative to bankruptcy for people with debts of less than £30,000 (£20,000 in Northern Ireland), who don’t own a home and have £75 a month or less after paying usual household expenses (£50 or less for residents of Northern Ireland).

Which debts are covered in a debt relief order?

Most debts are included in a DRO. This includes:

  • Credit Cards
  • Loans
  • Catalogs
  • Arrears with Council Tax, Income Tax, National Insurance Contributions
  • Arrears with Rent, phone bills, and utilities like gas and power
  • In-store credit agreements
  • Benefit overpayments unless they were fraudulent

Benefits of a DRO

You do not need to make any payments to your lenders for 12 months. If the Debt Relief Order is approved, interest and charges are guaranteed to be frozen. Your lenders are not allowed to contact you or chase you for payment. The debt included in the DRO is written off after 12 months if your situation doesn’t improve. A debt relief order can be a low-cost alternative to bankruptcy. Although a DRO is a formal debt solution, you don’t need to appear in court

The most common excluded debts are:

  • Criminal fines
  • Magistrate’s court fines
  • Child maintenance
  • TV license arrears
  • Loans from the DWP Social Fund, such as budgeting loans
  • Debts that have been taken out fraudulently, including benefit overpayments
  • Educational Loans, such as student loans
  • Social Fund loans
  • Personal injury liability ordered by a court

Things to consider

A DRO will appear on a public register and will affect your credit report negatively
A DRO application is made via an Approved Intermediary for a one-off fee of £90. This payment can be made in installments if required.
The DRO will appear on your credit file for 6 years.
Your details will also be recorded on the insolvency register, which is public.
If any of your debts are for goods bought on hire-purchase, you may need to give the goods back.
You can’t borrow £500 or more without telling the creditor about the DRO.
Most jobs will not be affected by a DRO. However, if you get a DRO it is possible that you may be disqualified from holding certain posts or offices. Check the terms and conditions of your contract or your professional codes of practice to see if there are restrictions.
You can’t get involved in promoting, managing or setting up a limited company, or be a company director, without getting permission from the court.
If your circumstances change during the 12 months of the DRO and you no longer meet the eligibility criteria, it is likely the DRO will be cancelled, and you will need to make alternative arrangements to pay your debts.

Is a DRO suitable for me?

DROs are specifically designed for people who have a smaller amount of debts and a lower income, and can be a cheaper alternative to bankruptcy.

To apply for a DRO, you must:

  • Live in England, Wales or Northern Ireland
  • Owe less than £30,0000 (£20,000 in Northern Ireland)
  • Have less than £2,000 in assets (£1,000 in Northern Ireland) and a car
  • Worth no more than £2,000 (£1,000 in Northern Ireland)
  • Have less than £75 in surplus income per month after paying your household bills and living costs (£50 in Northern Ireland)
  • Debt relief orders are not available if you live in Scotland. In Scotland, a minimal assets process (MAP) bankruptcy is a similar solution.

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