What is a Debt Relief Order?
A Debt Relief Order, or DRO, is a formal debt solution and is most suited for those who own little assets of value and have a low level of income. It is sometimes viewed as an alternative to Bankruptcy or IVA but the strict criteria can be difficult to meet.
How to apply for a Debt Relief Order?
An application must be made to the Official Receiver’s office through an authorised intermediary. The Official Receiver’s fee is £90. Intermediaries are not allowed to charge you a fee for submitting your DRO application to the Insolvency Service.
Criteria for a Debt Relief Order
- Debts of less than £20,000 and live in England, Wales or Northern Ireland. Debt Relief Orders are not available if you live in Scotland.
- Assets of less than £1,000.
- A car value of less than £1,000.
- A monthly surplus of less than £50.
- You must not be subject to any other insolvency procedure and cannot have had a DRO in the previous 6 years.
Advantages of a Debt Relief Order
- The fee of £90 is more affordable than some other debt solutions.
- A DRO lasts for 12 months.
- You are not required to make any contributions during that time.
- Interest and charges are frozen.
- At the end of this, your debt is written off.
- You will keep any asset, including a car, providing it is not valued at £1000 or more.
Disadvantages of a Debt Relief Order
- Your details will be included on the Insolvency Register and will appear on your credit file for 6 years after the date your DRO started.
- As a formal arrangement, you cannot apply for a DRO yourself – it must be done through an authorised representative.
- If you have a favourable change in circumstances during the 12-month duration the DRO may be revoked.
- You cannot enter into an DRO if you have an existing IVA, bankruptcy order or own your property.
- Once you've applied for a DRO and and have had a sucessful application, you won't be able to apply again for another six years. This applies even if your previous DRO was cancelled after approval.
Debts included/excluded from a DRO
There are some debts that cannot be included in a DRO and will still require repayments throughout and after your plan is completed.
Debts included in a DRO Debts excluded from a DRO Arrears on household bills Student Loans Credit Card Debt TV Licence Arrears Payday Loans Child Maintenance Service Arrears Overdrafts Criminal Fines Store Cards Social Fund Loans Hire Purchase (HP) Items bought on finance Loans from friends and family