Debt Relief Order (DRO)
What is a Debt Relief Order (DRO)?
A debt relief order (DRO) is a way to have your debts written off if you have a relatively low level of debt and have few assets.
A DRO is only available to individuals who have very little disposable income available to pay to their creditors, have few or no assets, and a limited level of debt.
You may be eligible for a Debt Relief Order if you owe less than £30,000 in total to your creditors, you have £75 or less left over each month after your essential bills and outgoings have been paid, your car (if you have one) is worth less than £2000 and your other assets don’t exceed a value of £2000.
A DRO will last for 1 year, and once your DRO has ended you are released from your debts (with certain exceptions).
You can only make an application for a DRO via an Approved Intermediary, and you will need to pay a fee of £90 to the Insolvency Service (the government) for the application to be reviewed and accepted.
Advantages of a debt relief order:
DRO Frequently Asked Questions
As well as directorships, a DRO may affect your job if you’re in a certain type of profession for example, if you’re a solicitor, accountant or insolvency practitioner. You’ll need to speak to your HR department, or professional body to see if your membership will be affected. If you’re planning to apply for a role in finance or security your DRO may affect your employment prospects.
If your situation improves during the course of your DRO, for example your income increases or you receive a lump sum of money, you’ll need to let the Insolvency Service know so they can assess your situation and decide whether it will affect your DRO. There could be serious consequences if you fail to tell them that your situation has improved.
A DRO won’t usually affect an ongoing tenancy but you may struggle to renew/get a new tenancy whilst your DRO is in effect.
The full balance of any joint debts will be included in your application and will count towards the £30,000 limit however, the joint party isn’t protected so they will remain liable for the full balance of any joint debts.
Yes, a DRO would include all qualifying debts (see ‘disadvantages’ for debts that don’t qualify). Once your DRO is approved you can’t add any debts to it so, if you miss a debt by mistake, you’ll remain responsible for paying it. If the debt takes you above the £30,000 threshold, your DRO may be revoked.
You can keep your car as long as it’s worth less than £2000, has been specially adapted for a disability, or is subject to the Motability scheme.
Once your DRO is approved you don’t have to pay anything to your creditors so you can use whatever disposable income you have to save towards a holiday however, this will only be a small amount because you can only have a DRO if you have less than £75 left over each month.
Rent arrears are a ‘qualifying debt’ which means they will be included within your DRO and no payments will be made towards the debt. Your landlord can’t take steps to recover the arrears, but they can still evict you from the property. You can’t have an allowance within your budget to repay the arrears however, you can choose to use your disposable income (which will be less than £75 per month) towards your rent arrears.
A DRO protects you from action by most creditors listed in your DRO. However, some creditors can still take action against you, for example for rent arrears or a hire purchase debt. If you’ve come to a payment arrangement with a bailiff, such as a controlled goods agreement, your DRO won’t stop them from taking and selling your goods. If you want to keep these belongings, you will have to keep making the payments you’ve agreed.
If you don’t yet have a CCJ, your lender won’t be able to apply for a CCJ after the DRO is approved. If you already have a CCJ, a DRO will stop the lender taking any further action against you to collect the debt, such as appointing bailiffs.
During the 12 months that you’re subject to a DRO, you are protected from further action relating to your debts. Once this period ends, you will be discharged and freed from liability for those debts.