A DRO is a form of insolvency and should not be entered into without the proper consideration.
The following are consequences you should be aware of:
Your DRO will be recorded on your credit report, impacting your ability to obtain credit in the medium to long term.
Like all adverse information, this will remain for 6 years.
During the DRO period – you must not attempt to borrow more than £500 without telling the lender about your DRO.
A bank may freeze or close an account of someone who becomes insolvent. Any account in debt will be closed as that debt will be part of the DRO. You will be able to get a basic bank account which will be without credit faculties.
DRO may be cancelled
Situations where a DRO might be stopped include where you:
- Acquire items of over the value of £2,000.
- Have an increase in your income, meaning you have more than £75 left over each month after all your household expenses are paid – although if this happens towards the end of your DRO, it may be extended to let you come to an arrangement with your creditors.
- Omitted important information about your debts, assets or income in your application.
- Didn’t Informed the Official Receiver about a change in your circumstances.
- Didn’t meet the criteria when you applied for a DRO.
- Don’t co-operate with the Official Receiver.
- You didn’t comply with the restrictions placed on you by the DRO.
- You obtained your DRO fraudulently.
Service providers such as gas or electricity suppliers may have concerns with the way they provide services to someone who is insolvent and may wish to change the way they receive payments. The changes could include the installation of a meter or the set-up of a pre-payment plan.
Every insolvency is recorded on a public register called the Individual Insolvency Register. Anyone can search the Register and there is no charge for doing this. Your details and notice of participation in a DRO will remain on the Register for 3 months after the DRO period completes.
Certain professionals may be affected by insolvency, for example, solicitors, accountants and Government officials, however, this is not a full list. You should seek advice you if you could be affected.
Debt Relief Restriction Orders
If it is considered that your conduct has been dishonest or blameworthy in some way, either before or during the DRO, you may become subject restrictions which can last between 2 and 15 years. Details of the particular restrictions applied are recorded on the Individual Insolvency Register.
The following are examples of behaviour by debtors that could be considered dishonest or blameworthy:
- Incurring debts that you knew you had no reasonable chance of repaying;
- Giving away assets or selling them at less than their value;
- Gambling or making rash speculations or being unreasonably extravagant; and
- Not co-operating with the administrators during the period of the DRO.
Failure to comply with the terms of DRO restrictions is an offence.