Debt Relief Orders

Debt Relief Orders

Low income and no assets? A DRO could be right for you.

To be eligible for a Debt Relief Order (DRO) you must meet certain criteria and not be involved in any other insolvency procedure. Debt Release Direct can help you decide whether this is an appropriate situation for you.

Setting up a DRO is done online by an authorised debt advisor. This information is sent to the Official Receiver. You will have to tell the Official Receiver if you paid some creditors but not others and if you have given away or sold any assets for less than they were worth in the last two years, preceding your DRO application.

How DROs work

Once the application has been made and the Official Receiver has approved it you will be required to give them any information they ask for about your finances. They will explain the restrictions that you must abide by. They will also contact your creditors and inform them that they must not contact you to make payments to them. If any creditor does contact you or you make a payment to them you must tell the Official Received straight away. If your income increases you must tell the Official Receiver and he may allow you an extension of up to three months to agree with your creditors how to repay them.

If your circumstances haven’t improved when your DRO comes to an end, the debts listed within it will be written off. However, your creditors can apply to the OR to extend your DRO, and/or the restrictions that have been placed on you, beyond the initial 12 month period.

During the DRO, you must cooperate with the OR at all times. If your circumstances improve enough for you to start repaying your creditors, they’ll consider whether or not to terminate the order. Should this happen, you’ll have to start repaying your debts.

If your circumstances change towards the end of your DRO, the OR can extend it by up to three months. This gives you some breathing space to agree with your creditors how you’ll repay your debts. During this time, you’ll still have legal protection from them. But you’ll also still be under the restrictions placed on you at the start of the DRO.

Qualifying for a DRO

The Government has set very strict criteria around who can qualify for a DRO. It may be a suitable option if you

  • You must not owe more than £20,000
  • You have less than £50 to spend each month, after paying tax, national insurance, and normal household expenses.
  • You have lived or worked in England or Wales in the last 3 years.
  • You don't own any assets over the value of £1000 in total.
  • You have not been in a Debt Relief Order in the last 6 years
  • You cannot already be in any other formal insolvency procedure but if a creditor has applied for your bankruptcy you can ask them to allow you to apply for a Debt Relief Order

Some advantages and disadvantages of a DRO

Advantages

Disadvantages
  • Your creditors are legally bound not to pursue your debts during the DRO
  • If your circumstances don’t improve after 12 months, your debts will be discharged
  • The eligibility criteria are very strict
  • You’ll have to pay court fees
  • During the DRO, you’ll have to comply with certain restrictions
  • Your creditors can ask the OR to extend the term of your DRO and/or restrictions
  • The DRO will stay on your credit file for at least six years after its start date

 

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