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.