A DRO is a Debt Relief Order and can be an alternative option to bankruptcy. Usually, while a DRO is in force, you do not have to make payments against your debt and interest is frozen. A DRO typically lasts for 12 months. If at the end of the DRO, you are still unable to pay your debts, they may be written off. Not all debt is covered by a DRO.
Who is eligible for a DRO?
DROs are designed for people with relatively low debt and very few assets. They are only available to those living in England or Wales; there are alternative options if you live in Scotland.
You may be able to get a DRO if the following apply:
- Your debt is less than £20,000
- You are not a homeowner
- You have less that E£50 income per month after you have paid your household bills
- You don't have any assets worth more than £1000
- You have not had a DRO in the last six years
- You are not going through bankruptcy, individual volountary arrangement (IVA) or other form of formal insolvency
- You are unable to repay your debts
You must declare if you have given away any belongings, sold assets for less than they are worth or prioritised one debt over another in the last two years.
If you think you are eligible for a DRO, then you should speak to a professional debt advisor who will help you decide if this is the right solution for you.
What debts does a DRO cover?
A DRO covers debts such as:
- Credit cards
- Loans (not student loans)
- Arrears with utility bills, telephone bills or rent
- Arrears with council tax or income tax
- Benefits overpayments
- Buy now, pay later agreements
- Hire purchase
- Business debt
Debts such as court fines, student loans and child support are not covered by a DRO
What are the disadvantages of a DRO?
A DRO may affect you in the following ways:
- If you are in arrears with rent, your landlord could still take action
- Not all debt is covered by a DRO
- You may still have to pay some debts after the DRO has ended
- You may have to return any goods bought on hire purchase
- There will be restrictions on your borrowing and business activities
- Whilst the DRO is in force, your details will be available on the Insolvency Service's Individual Insolvency Register for anyone to view
- Your DRO could remain on your credit record for six years making it difficult to obtain credit or a mortgage in the future
Should you apply for a DRO?
Before you apply for a DRO you should seek professional advice so that you understand the restrictions and financial implications. Your local Citizens Advice is a good place to start.
A DRO could affect your borrowing going forward so it is important you understand what it means both short term and long term.