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Debt Relief Order

A Debt Relief Order (DRO) can be a lifeline if you’re struggling with debt. At Advice Centre Group, we’re here to help you understand if this solution could be right for you.

Debt Relief Order

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What is a Debt Relief Order?

A Debt Relief Order  is a formal debt solution for individuals with low income, minimal assets, and relatively low debt levels. It provides a legal way to deal with unmanageable debts when you can’t afford to make payments.

With a DRO:

  • You won’t have to make payments toward most debts included in the order
  • Creditors cannot force you to pay off these debts during the DRO period
  • Most qualifying debts are written off after the DRO ends (typically after 12 months)
  • You’ll work with a specialist DRO adviser who will help with your application
  • The application process is handled by an official receiver

A DRO offers a fresh financial start with less cost and complexity without many of bankruptcy’s drawbacks.

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Is a Debt Relief Order Right for You?

You can qualify for a Debt Relief Order if all of the following criteria apply:

  • Your qualifying debt should be less than £50,000
  • You have £75 or less left each month after paying household expenses
  • Your total assets are worth no more than £2,000
  • If you own a vehicle, it must be worth less than £4,000
  • You don’t own a house.
  • You haven’t had a DRO in the last six years.
  • You’re not already in another debt plan like bankruptcy or an IVA.

Debts That Can Be Included In a Debt Relief Order:

  • Credit cards and overdrafts
  • Personal loans
  • Rent, utility, and council tax arrears
  • Telephone bills
  • Income tax and benefits overpayments
  • Hire purchase agreements
  • Buy now – pay later agreements
  • Bills for services (vets, solicitors, etc.)
  • Personal debts (friends and family)
  • Business debts

Debts That Can Be Included In Debt Relief Order:

  • Magistrates court fines and confiscation orders
  • Child support and maintenance
  • Student loans
  • Social fund loans
  • Compensation for death and injury
  • Debts obtained through fraud
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Pros and Cons of a Debt Relief Order

Advantages

  • Most qualifying debts are written off after 12 months
  • You don’t make payments toward included debts during the DRO period
  • Creditors can’t pursue you for payment once the DRO is made
  • Much less expensive than bankruptcy
  • No court appearances are required
  • Straightforward application process with adviser help
  • Provides a clean slate after completion
  • Most debts can be included, including rent arrears, fuel debt and Council Tax
  • It’s a formal, legally binding agreement

Disadvantages

  • Stays on your credit file for 6 years
  • Restrictions on company directorship and business activities
  • Your details appear on the Individual Insolvency Register
  • Strict asset limits – homeowners with equity won’t qualify
  • Secured creditors can still take action against you
  • Some debts remain (court fines, student loans, maintenance payments)
  • May affect current or future tenancy agreements
  • Your credit rating will be affected

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frequently asked questions About Debt Relief Order

A Debt Relief Order (DRO) is a formal debt solution designed to help you clear your debts. It normally lasts for 12 months, and, if approved, allows you to stop making payments towards the debt (and any related interest) included within the DRO. After 12 months, you won’t have to pay the debts any more, however, the DRO does stay on your credit reference file for 6 years from the date it was approved.

A debt advisor will calculate your total debt, the value of your possessions and how much money you have left at the end of each month. In order to prove the need for a DRO, this will all need to be evidenced.

A debt advisor will calculate your total debt, the value of your possessions and how much money you have left at the end of each month. In order to prove the need for a DRO, this will all need to be evidenced, which could involve looking at your bank statements.

The level of debt needed for a DRO has no minimum limit (although it does have a maximum one of £30,000).

Yes, bailiffs can still come if your debts are not covered by the DRO. That being said, it’s a formal agreement, so bailiffs will back off for any debts covered by your DRO. If bailiffs arrive for a debt covered by your DRO, immediately contact your provider.

The Insolvency Service should make a decision on your case within 10 working days, so as much as you come prepared to your debt meeting, with evidence of your incomings, outgoings and assets, that will ensure you get it processed as fast as possible.

A DRO is based on your debt level, income, expenditure and assets. You wouldn’t be eligible if your debts amount to more than £30,000, your disposable income is over £75 per month, or your assets total over £2,000. You must also have not had a DRO in the last six years, are not currently subject to a bankruptcy, IVA or an interim order, and you must have lived or worked in England or Wales in the last 3 years. Finally, you must be a resident of England or Wales. Ineligibility for a DRO doesn’t necessarily mean you’re stuck and there may be other options out there for you. Speak to us for more advice.

Any creditor may object to the DRO being made, however, they can only do this on certain grounds, such as they don’t feel you’re eligible, however, they can’t object to being included on the DRO. If the creditor is covered on the DRO, you’re safe from them.

After 12 months on a DRO, your debt are effectively written off if your situation has not improved. You won’t receive any kind of formal ending notification. As your debt will be written off at this stage, these debts will appear on your credit file for 6 years from the ending date. That’s because all debts, unpaid or resolved, stay on your credit file for 6 years.

It may be more difficult to get a phone contract with adverse credit, but there’s no terms within the DRO that says you can’t get a contract. However, you should check with your adviser if the contract can be covered as expenditure, due to contracts often covering the cost of the handset as well as the service you receive from them.

It’s possible your bank account will be frozen under a DRO, this would be especially true if you have an overdraft as that will enter your DRO. If your account is frozen, you’re free to open an account with a different provider, however, it’s likely to be restrictive and you may only be eligible for a basic bank account.

There’s quite a strict criteria to be eligible for a DRO. You must owe less than £30,000 in total, your savings and assets (including vehicle, if you own it) must be below £2,000, you don’t have enough money at the end of the month to make your repayments. You must also have not had a DRO in the last six years, are not currently subject to a bankruptcy, IVA or an interim order, and you must have lived or worked in England or Wales in the last 3 years. Finally, you must be a resident of England or Wales.

During the duration of a DRO, there are a few things you can’t do, such as getting credit for more than £500 without telling the lender you have a DRO. You also can’t trade a business in a different name to the one in which you were given the DRO, without explaining the link with anybody you do business with. You also can’t be involved with promoting, managing or setting up a limited company without permission from the court. Finally, you won’t be able to act as a company director without prior permission from the court. Breaking any of these restrictions is an offence and could lead to a fine or imprisonment.

If your DRO is approved, you don’t need to pay anything to your creditors, and can use your disposable income as you wish. However, in practice, If you have over £75 of disposable monthly income, you wouldn’t be eligible for a DRO, so affording a holiday may prove difficult.

The criteria for a DRO is very strict and rejection is common. It could be that you don’t meet the minimum criteria or you didn’t provide further information requested. It’s also possible that the official receiver believes you haven’t been honest in your application.

If you have all your evidence ready to produce prior to getting debt advice, and if your debt advisor believes a DRO would be the best option, the application can be submitted in a matter of days. The Insolvencty Service then make a decision on your application and that will usually take around 10 working days.

A DRO is a form of insolvency, and as such, could affect your ability to secure a new job. If you’re currently in work and worried about what the effect will be, you’re best off talking to your employer. Some industries such as security, finance or legal may have restrictions on employees being insolvent.

A DRO and an IVA are both valuable solutions, really aimed at different levels of debt, so comparing them to each other is largely pointless, as eligibility for one usually negates eligibility for the other. A DRO will clear your debt sooner, but has very strict criteria, whereas an IVA will last longer, but has looser requirements.

Providing your vehicle is worth less that £2,000 or adapted to support a disability, it won’t count as an asset (but this only covers 1 vehicle) if you own it. If your vehicle is on HP, however, the situation is complicated. You don’t actually own the vehicle, so it won’t be counted as an asset, however, the maximum disposable income is £75 which doesn’t leave much room for HP, insurance and road tax, as well as your other living expenses. There may also be an insolvency clause within your HP contract, so you’ll need to check the terms.

Yes, it certainly can do. As a formal debt solution, insurers can consider you a higher risk, because you’re more likely to miss payments.

While it doesn’t specifically cancel the CCJ (if it’s already been issued) you will still be protected and they won’t be able to send bailiffs to collect the debt. A DRO will also prevent your creditors from taking you to court to get a new CCJ applied.

If your debt relief order is already in effect, a Universal Credit applicant can apply for any kind of advance, and is recoverable in full, as normal. If your advance was taken out before the start of the DRO, it will be included within the DRO as any other eligible debt would.

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Email us – Enquiries@advicecentregroup.co.uk

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Advice Centre Group Ltd registered in England and Wales (14322979). Registered office: Second Floor A, Cheadle Place, Cheadle, Cheshire, England, SK8 2JX. 

Adam Southard is authorised as a Licensed Insolvency Practitioner in the United Kingdom by the Insolvency Practitioners Association, We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meet the criteria for one of our insolvency solutions, therefore, all advice regarding Individual Voluntary Arrangements (IVA) is given in reasonable contemplation of an insolvency appointment.

Adam Southard is licensed to act as an Insolvency Practitioner in the UK by the Insolvency Practitioners Association. Office Holder No. 11930

Insolvency Practitioner Directory- Insolvency Practitioner Details (bis.gov.uk)

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(Insolvency Service)

We provide solutions to individuals throughout the UK, We Will help recommend solutions available to your circumstances in which you can then make an informed decision about which solution you qualify for is best for you and your circumstances.

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