Debt Relief Order (DRO)
What is a Debt Relief Order (DRO)?
A Debt Relief Order (DRO) is a way to get your debts written off if you don’t owe very much and have few assets. It’s only available for individuals who have very little left over each month after paying their priority bills and essential spending.
You might be able to get a DRO if:
- You owe less than £50,000
- You have £75 or less left over each month after your essential living costs
- Your car is worth under £4,000 (£2,000 in Northern Ireland)
- Your other belongings are worth less than £2,000
A DRO lasts for one year. After that, if your situation hasn’t improved, the debts included will be written off. You don’t have to pay anything during the year, and it’s free to apply.
You must apply through someone called an Approved Intermediary.
Is a DRO the right option for you?
A DRO is a type of insolvency, so it’s important to think carefully before you apply:
- You’ll need to show documents that show your situation. This will include wage slips, bank statements, benefit statements and more. (You can read more about what evidence you’ll need to provide here.)
- Your name will appear on the public insolvency register whilst you are in the DRO, and your credit file will be impacted for 6 years from the date it’s approved.
- Although we can check your eligibility online, you will need to complete your application by phone with an advisor.
Advantages of a debt relief order:
DRO Frequently Asked Questions
Before you can apply for the DRO, you will need to provide documents that match the details on your application. This is likely to include:
- PDF copies of your last 3 months’ bank statements (to show what bills you pay)
- Your last 3 payslips and/or most recent Universal Credit statements
- Award letters for any other benefit income you receive
- Proof of ID
- Vehicle information – to evidence how much it’s worth
- Recent letters from your creditors
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.
Joint debts are included in your DRO, and the full balance will count towards the £50,000 debt limit. However, only you are protected by the DRO, so the other person named on the debt will still be responsible for paying it in full.
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 £50,000 threshold, your DRO may be revoked.
You can keep your car as long as it’s worth less than £4000, 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.
Debts owed to family and friends are classed as qualifying debts and must be included in your Debt Relief Order (DRO). This means you won’t be able to make regular payments towards these debts while the DRO is in place. Once your DRO is approved, the people you owe money to -including family and friend debts will receive formal notification of the arrangement.