Debt Relief Order (DRO)

A Debt Relief Order (DRO) is an order granted by the Insolvency Service in cases where you can’t afford to pay off debts. It usually lasts about 1 year and during this time your creditors cannot take action against you to get their money back. Once the period of the DRO has elapsed all debts included in the Debt Relief Order are written off. If you do not meet the criteria of a DRO below then you may want to consider an IVA.

You cannot apply for a DRO yourself so you will need to contact an authorised adviser who can apply for you.

You can apply for a DRO if:-

1. You do not own a property (this applies whether it has equity or not)
2. You do not own a car that is worth more than £2,000
3. You do not own assets worth more £2,000 (this excludes clothing, furniture, white goods and other assets that are required to meet your basic domestic needs)
4. Your unsecured debts do not exceed £30,000
5. Your monthly surplus household income (that is after all domestic expenditure) is less than £50
6. You are not already bankrupt or subject to bankruptcy restrictions
7. You are not already in an Individual Voluntary Arrangement (IVA)
8. You have not been in a DRO in the last 6 years

You must satisfy all of the above conditions, failing which it is unlikely that you would be able to apply for a DRO.

Advantages of Debt Relief Order

1. An approved intermediary will assess whether you qualify for a DRO and give you appropriate advice and assistance
2. The application fee is low cost at £90 and can be paid in installments before the application is made
3. The DRO lasts 12 months
4. Your debts will be written off at the end of the DRO (save for a number of exceptions ie fines, student loans, debts deriving from family proceedings)
5. If you have a low value vehicle and domestic assets you will be able to keep them
6. A Debt Relief Order is low cost alternative to bankruptcy

Disadvantages of a Debt Relief Order

1. The Debt Relief Order is entered onto a public register
2. You will be committing an offence if you obtain credit of more than £500 or more without disclosing that you are the subject of a DRO
3. Your employment may be affected
4. You may have a Debt Relief Restriction Order made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly when obtaining credit
5. You will remain liable to pay certain debts, in particular student loans, fines and some debts arising from family proceedings
6. A Debt Relief Order can be revoked (withdrawn) if you do not co-operate with the Official Receiver during the year that your DRO is in force and you could end up in a worse position financially
7. You cannot act as Director of limited company unless you obtain the consent of the Court
8. If your financial position changes during the term of the DRO your DRO may be evoked.

Disclaimer
X-debt do not advise clients or assist with the application of DROs. The above information is generic information and should not be constituted as specific advice to an individual. If you believe you may qualify for a DRO you should seek specific advice from one of a number of approved intermediaries who can help complete an application for a DRO. The Money Advice Service has information about organisations that can help you with a DRO.