A debt relief order (DRO) is a debt solution if you have few assets, you’re not a homeowner and your debts are £20,000 or less. Some types of debt don’t count towards this limit, so check whether you’re eligible before you decide on the right debt solution for you.

A Debt Relief Order is formal debt solution; by this we mean it is based around Government legislation and once in place is legally binding.

It is intended for people overwhelmed by personal debts and:-

  • With little or no assets.
  • With little prospect of ever repaying a significant part of their debt.
  • Not able to make meaningful monthly payments (less than £50 per month).
  • Would be suitable for bankruptcy were DROs not available.

Ongoing payments from income are NOT required and provided you continue to meet the eligibility criteria; all included debts are written off after the DRO period; which is normally 12 months.

A DRO does not involve any court process – is facilitated by the Insolvency Service.

A DRO can to thought of as being as fast track bankruptcy. The outcome is similar but as debts are to a certain limit and their are no assets to consider; the process is simpler and cheaper.

DRO’s were introduced into UK insolvency in 2007. Before then an issue was; for many while bankruptcy was their best course of action, fees of around £1000 at the time were not affordable.

Both Bankruptcy and DRO free you from all included debts once the process is complete; which is usually 12 months.

The main differences are:-

  • Fees; currently £90 for a DRO, £680 for Bankruptcy.
  • Depending on affordability, payments towards a bankruptcy could by required for 36 months. There are no such payments with a DRO.
  • Eligibility criteria (see below).

You may qualify for a DRO if ALL of the following applies to you.

  • You’re currently struggling to repay your debts as they fall due.
  • You own no more than £20,000.
  • You can afford to pay no more than £50 towards your debts per month once reasonable living costs are taken into account.
  • You are not a homeowner.
  • Your assets (things your own) value less than £1000 in total (some items can be excluded when calculating this amount).
  • You don’t own a vehicle worth £1000 or more, unless it’s specially adapted due to disability.
  • You haven’t had a DRO in the past six years.
  • You’re not within another insolvency procedure such as bankruptcy or an individual voluntary arrangement (IVA).
  • You’ve lived, had a property, or worked in England or Wales in the last three years.

Debts that can go into a DRO are called qualifying debts. They include:-

  • All debts from unsecured personal borrowing – credit cards, overdrafts and loans
  • Arrears with rent, utility bills, phone bills, council tax and income tax
  • Benefits overpayments
  • Hire purchase or conditional sale agreements*
  • Buy now – pay later agreements*
  • Business debts.

* Only if you no longer possess the item or other factor make repossession impossible or not practical.

If you obtained any of debt by fraud, you will be required to pay them when the DRO has ended.

Note: While will you can include current rent arrears to a current landlord/council – it does not stop them from seeking to evict you.

Debts that can’t go in a DRO include:

  • Magistrates Court fines and confiscation orders – that is, fines relating to criminal activity.
  • Child support and maintenance.
  • Student loans.
  • Social fund loans.
  • Compensation for death and injury.

There debts would also survive bankruptcy and do not count to the DRO debt limit.

If you’re unsure whether a debt would be covered by a DRO, contact us.

DROs are for insolvency cases where assets are so minimal they need not be considered as items that can be disposed of (sold) to raise money to pay towards the debts.

Anything that it not needed for basic domestic living and can easily be sold can count towards the £1,000 limit.

Items that are not considered towards this limit include:

  • Household items such as TVs (within reason) bedding, clothing and furniture.
  • Tools, books and other items use in a job or business.
  • A vehicle with specially adapted because you have a disability and which you need to carry out your everyday activities
  • Most kinds of pension funds. If you can access your pension fund now it might be counted as an asset and could stop you from getting a DRO if the value of the fund is more than the value of your debts.
  • Wedding rings
  • One domestic vehicle worth up to £1,000. If you own a vehicle that’s used for business purposes only, it’ll be counted as part of the total assets you’re allowed.

If your circumstances change during the DRO period, you have a legal obligation to inform the Insolvency Service. These changes may include:

  • Anything which you realise is in error or omitted from the information you gave when setting up the DRO.
  • Anything which may improve you abilities to repay your debts.
  • Any increase in your income
  • Any additional money or assets that you acquire, such as money left in a will.

If you fail to inform the Insolvency Service of such changes, you will be committing an offence.

This could lead to the DRO being cancelled leaving you to deal with your debt situation in a different way. It could also lead to a debt relief restrictions order made against you, and could result in you being fined or even (in extreme cases) sent to prison.

In most cases – probably not.

Some professions have regulatory bodies which make being able to practice when subject to personal insolvency difficult.

Some employers may not allow people in a DRO or bankrupt, most commonly financial institutions or other jobs handling money.

Before entering a DRO, you should check the terms of your employment contract or speak to your employer if this is of concern.

If your circumstances change during the DRO period, you have a legal obligation to inform the Insolvency Service. These changes may include:

  • Anything which you realise is in error or omitted from the information you gave
  • Anything which may improve you abilities to repay your debts.
  • Any increase in your income
  • Any additional money or assets that you acquire, such as money left in a will.

If you fail to inform the Insolvency Service of such changes, you will be committing an offence.

This could lead to the DRO being cancelled leaving you to deal with your debt situation in a different way. It could also lead to a debt relief restrictions order made against you, and could result in you being fined or even (in extreme cases) sent to prison.

The full amount of any debts you share jointly with another person must be included in your application.

They will count towards the £20,000 debt limit.

However, only the person in the DRO will be released from responsibility for the debt at the end of the DRO period.

This means the other person could still be chased for the full amount of the outstanding debt.

About Joint Debts

Joint debts are not as common as many people think as both parties must has signed the credit agreement or be named on the bill/invoice.

Credit cards are never in joint names. Additional card holders simple have permission to spend against main card holders credit.

When a debt is in more than one name; all parties are liable for the full amount of the debt until it is paid in full. This is not altered by whom benefits from the credit/services nor whom has been making payments.

No, you cannot.

All known qualifying debts must be included in a DRO application.

You cannot write off part of a larger debt with a DRO while continuing to pay some creditors; all creditors must be treated equally.