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    Debt Relief Order (DRO) 

    What is a Debt Relief Order (DRO)?

    A Debt Relief Order (DRO) is a way of dealing with your debts if you can’t afford to pay them. It means that you don’t have to pay certain kinds of debt for a specified period (usually 12 months).  At the end of the DRO period, the debts included in it will be written off (or discharged) and you won’t have to pay them. If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended. If your circumstances change so that you are able to pay some or all of your debts, your DRO may be revoked so you can arrange to pay your creditors (the people or companies you owe money to.)

    Who is eligible for a DRO?

    DROs don’t suit everyone. You are only eligible for a DRO if you meet all the following conditions:

    • You are unable to pay your debts
    • You owe up to a maximum of £20,000
    • Your assets aren’t worth more than £1000 in total
    • You have less than £50 to spend each month, after paying tax, national insurance and normal household expenses
    • You’ve not had a DRO in the last 6 years

    You must not involved in any other formal insolvency procedure at the time you apply for a DRO, such as:

    • An undischarged bankruptcy order
    • A current individual voluntary arrangement
    • A current bankruptcy restrictions order (BRO) or undertaking (BRU)
    • A current debt relief restrictions order or undertaking (DROO or DRRU)
    • An interim order

    Can you apply for a DRO and bankruptcy?

    If you are currently petitioning for bankruptcy (asking a court to make you bankrupt) and the court has not referred you to the DRO procedure, then you won’t be allowed to apply for a DRO at the same time.

    If a creditor is currently petitioning for your bankruptcy (asking a court to make you bankrupt), then you must get the creditor’s permission before applying for a DRO. If you have given away any assets or sold them for less than their true value in the last 2 years, the official receiver may not approve your application. If you have preferred any creditors over others in your payments within the last 2 years, the official receiver may not approve your application.

    How do you apply for a DRO?

    You can’t apply for a DRO yourself; you have to ask an authorised debt adviser to do it for you. Your debt adviser will help you complete the application and assess whether a debt relief order is the most suitable option for you.

    What is the cost of a DRO?

    The officail receiver’s fee is £90. This must be paid at the time of the application and won’t be refunded once a decision has been made, even if you aren’t granted a DRO. The fee must be paid in cash. Some people are able to get a charity to pay their fee – your debt adviser can tell you more about this.

    How will my credit file be affected?

    Your DRO will usually stay on your credit reference file for 6 years from the date that it was granted. You may need to send the credit reference agencies a copy of an official document stating that your DRO has ended, if they don’t update your file automatically after 6 years.

    DRO Information

    Who qualifies for a DRO?

    DRO’s don’t suit everyone. You are only eligible for a DRO if you meet all of the following conditions:

    • You are unable to pay your debts
    • You owe up to a maximum of £20,000 only
    • Your assets aren’t worth more than £1000 in total
    • You have less than £50 to spend each month, after paying tax, national insurance and normal household expenses
    • You’ve not had a DRO in the last 6 years

    You must not be involved in any other formal insolvency procedure at the time you apply for a DRO, such as:

    • An undischarged bankruptcy order
    • A current individual voluntary arrangement
    • A current bankruptcy order (BRO) or undertaking (BRU)
    • A current debt relief restrictions order or undertaking (DRRO or DRRU)
    • An interim order

    IVA Costs

    An IVA is not free. Legally, you cannot set up your own IVA. The insolvency practitioner who will set up your IVA, will charge you a fee. This fee is normally taken as regular instalments from the payments that you make towards your IVA. The fee is to cover the cost of the advice offered by the insolvency practitioner, the time spent putting together the legal aspects of the IVA and negotiating with your creditors, and also managing the IVA once it has been set up.

    What is the cost of a DRO?

    The official receiver’s fee is £90. This must be paid at the time of the application and won’t be refunded once a decision has been made, even if you aren’t granted a DRO.

    The fee must be paid in cash. Some people are able to get charity to pay their fee – your debt adviser can tell you more about this.

    What are the restrictions of a DRO?

    A DRO places certain restrictions on you, as follows:

    • If you wish to obtain credit of £500 or more, either alone or jointly with another person, you must first tell the lender that you are subject to a DRO. This restriction applies to borrowing money, and also to getting credit by acting with the intention of getting it, even though you have not entered into a specific agreement for it. This would include, for example, ordering goods without requesting credit but then failing to pay for the goods when they are delivered.
    • If you carry on a business (directly or indirectly) in a name that is different from the name under which you were granted a DRO, you must first tell all those with whom you do business the name under which you were granted a DRO.
    • You may not be involved (directly or indirectly) with the promotion, management or formation of a limited company, and may not act as a company director, without the court’s permission.
    • You will not be eligible to apply for a DRO again for 6 years.
    • Apply for an overdraft without telling your bank or building society about your DRO.

    You are permitted to open a new bank or building society account after the granting of a DRO. However, the bank or building society may require you to disclose that you are the subject of a DRO. It may then decide whether or not to permit you to open an account, and whether to impose any conditions or restrictions on the use of the account. You must also tell the bank or building society that you are subject to a DRO before you apply for any overdraft facilities. Also, if you are subject to a DRO you must not write cheques that are likely to be dishonoured.

    If, when enquiring into your affairs, the official receiver decides that you have been dishonest before or during your DRO or that you are otherwise to blame for your position, they may apply to the court for a DRRO. The court may make an order against you for between 2 and 15 years, and this order will mean you continue to be subject to the restrictions of a DRO.

    Which debts are not included in a DRO?

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    Some types of debt won’t be covered by a DRO and you will still have to pay them. These include:

    • Child maintenance, or anything you owe under family proceedings
    • Student loans
    • Budgeting and crisis loans from the Social Fund
    • Debts secured against an asset you own
    • Fines or drug offences
    • Damages or fines a court has ordered you to pay
    • Unpaid TV licence fees
    • Any debts you incur after the DRO is granted

    If you run up new debts after the DRO is granted, you could face:

    • A bankruptcy order
    • Prosecution, if you incurred a debt without telling the creditor about your DRO
    • You must also continue to pay any regular commitments like rent and bills
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    What happens when the debt relief order finishes?

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    At the end of your DRO, the scheduled qualifying debts listed in it will  be discharged and you won’t have to pay them. If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended.

    You can check the date your DRO ended online using the Individual Insolvencu Register. When your DRO (moratorium period) has finished, make sure to keep your order paperwork.

    You might need to show evidence of your DRO order, especially if you are trying to get credit or update your credit record. Anyone can ask you for evidence of your DRO.  [/vc_column_text]

    How can I set up an DRO?

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    If you want to get started with a DRO, contact us at 0800 088 2303. Alternatively, you can fill out our debt calculator to see if you qualify . [/vc_column_text]

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