What is a Debt Relief Order (DRO)
*Please note this solution is only available in England, Wales and Northern Ireland
A debt relief order (DRO) is a solution that allows those who have very few assets and a debt level on the lower end of the scale to have their debts written off.
It essentially freezes all your debt payments for a period of 12 months. You will also not be charged any interest in this time. If your circumstances haven’t changed by the time the period ends, then the debts will be written off.
For those who live in Scotland, then the minimal asset process (MAP) is a similar option. However, this will have different advantages, disadvantages and fees linked to it.
Find out if you qualify to write off up to 81% of your unsecured debts.Check if you qualify
How much does a Debt Relief Order cost?
You do need to pay a fee when applying for a Debt Relief Order. It will cost you £90, which needs to be paid directly to the Insolvency Service. Applications cannot be submitted until the fee has been paid.
It’s normally advised that you pay this in full. However, if you live in England or Wales it is possible to pay it in instalments if necessary.
Do I qualify for a Debt Relief Order?
To be able to apply for a Debt Relief Order, you’ll need to meet a set of conditions. You must:
- Have a debt level of less than £20,000
- Not be a homeowner
- Live in England, Wales or Northern Ireland
- Have assets that have a total worth of less than £1,000 (however you can own a car worth up to £1,000 as well as this)
- Be left with less than £50 after all essential living costs have been paid
Those who don’t fit this criteria won’t be able to apply for a Debt Relief Order. However, there are other options out there to help you deal with your debts successfully.
How do I apply for a Debt Relief Order?
All applications for Debt Relief Order’s need to be made through a specialist adviser, also sometimes known as an ‘intermediary’ – who needs to be approved by the Insolvency Service. This goes as below:
The adviser will take all your details to ensure that you qualify and ready your application for submission. You’ll likely be asked to send over documentation proving your income and expenditure as well as the balances of your debts.
You’ll then need to pay the £90 fee in order for the adviser to submit your application to the Official Receiver (a civil servant at the Insolvency Service)
Once it has been submitted, the Insolvency Service will decide whether or not to approve it within 10 working days
If approved, you will then enter the year-long ‘moratorium’ – which is the stage where all your debt payments and interest charges are stopped.* It will also be noted on the Individual Insolvency Register. As long as your situation doesn’t change within this time, then your debts will be written off.
*It’s important to note that although you won’t be paying the interest during the moratorium, it will still be added to your debts – and if your Debt Relief Order gets revoked (cancelled) at any point during this time then it will have an effect on your debts.
If you’re unsure if this is the right solution for your situation or would just like more information, then speak to an expert debt adviser to make sure you choose the best decision for you.
How long does a Debt Relief Order last?
Debt Relief Order’s will generally last for 12 months. This is also known as the moratorium period, which is where your lenders cannot take any action against you for the debts included.
Lenders can contact you during this period, but only to keep you up to date with your balances. They cannot demand payment or begin any court proceedings; if they do, advise them of your Debt Relief Order.
What debts can be included in a Debt Relief Order?
You’ll need to declare all the debts you have when applying for a Debt Relief Order, but you can’t include everything.
Debts you can put into a Debt Relief Order include:
- Credit card
- Utility bills
- Rent arrears
- Payday loans
- Council tax
- Bank/personal loans
- Catalogues or store cards
- Non fraudulent benefit overpayments
- Hire purchase agreements
You won’t be able to include debts such as any student/social fund loans, criminal fines, TV licence or Child Maintenance Service arrears. If you have any of these debts, you will need to continue to pay these until they are cleared.
If you forget to add a debt during the application process, you cannot add it to your Debt Relief Order once it’s begun.
In these cases, you will need to pay the debt yourself, and in others it could also lead to your Debt Relief Order being revoked if it takes your debt level over the level laid out in the conditions needed to qualify.
Where are Debt Relief Order's listed?
Once your Debt Relief Order has been approved, it will be recorded on a public register.
For those who live in England and Wales, this will be the Individual Insolvency Register. The details will remain there for the 12 months you are in the Debt Relief Order and won’t be removed until three months after it ends.
Those living in Northern Ireland will have their Debt Relief Order recorded on the Debt Relief Order register, which again won’t be removed until three months after it has ended. This will be the case whether it has been successfully completed or cancelled.
Depending on your situation, you can apply to have details of your address kept off the register. This is especially helpful to those who are at risk of domestic violence etc.
Are there restrictions on a Debt Relief Order?
Not unlike other debt solutions such as bankruptcy, you will be given a set of restrictions once your Debt Relief Order is in place. These include:
- You won’t be able to apply for any credit over £500 without telling the company you are subject to a Debt Relief Order
- You’ll be unable to set up a limited company or become a director of a company without getting permission from the court first
- If you’re self-employed, you won’t be able to continue running a business under a different name without making everyone aware that it was part of your Debt Relief Order
In cases where the Insolvency Service think you have lied or hidden information, then they may apply for a debt relief restriction undertaking/order (DRRU/O). This essentially will result in these restrictions being extended for up to 15 years.
What happens after a Debt Relief Order ends?
Debt Relief Order’s end once the 12-month moratorium ends. If your circumstances haven’t changed at this point, then the debts included will be written off.
You won’t be sent a notification to let you now that you Debt Relief Order has ended, so it’s a good idea to note down the approval date to keep you right.
It’s also important to note that you will not be protected from any new debts taken out after your Debt Relief Order approval date or any of the debts that were excluded. You will need to continue to pay these.
Once you a completed the Debt Relief Order, you can begin to rebuild your credit rating, but as it will be noted on your credit file for six years you may find it difficult to be approved for any credit. Our advice is that it would be best to wait a while before attempting to apply for credit.
If you need more information or advice on the options for dealing with your debts, we’re here to help. Just click below to be connected to one of our expert advisers.
Advantages of using a Debt Relief Order
- Although it’s a formal solution, you don’t have to go to court to get it approved
- You don’t need to make any payments towards your debts for 12 months, after which the debts are written off
- Lenders cannot chase you for payment during the 12-month period
- It’s relatively low-cost as the only fee you have to pay is the £90 application fee
Disadvantages of using a Debt Relief Order
- There is a strict criteria you need to fit to be able to apply
- Homeowners cannot apply
- It will appear on the Individual Insolvency Register, which can be seen by the public
- Your credit rating will be negatively affected