In This Bankruptcy Guide:
Debt Relief Order – DRO Guide
What Is A Debt Relief Order?
A DRO is a formal insolvency procedure administered by an Official Receiver for low income, low asset, low debt level situations. A DRO 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 that you can arrange to pay your creditors (the people or companies that you owe money to)
Benefits of A DRO
A debt relief order can be a cheaper alternative to bankruptcy
You don’t need to pay anything towards your debts for 12 months. After the 12 months, they’ll be written off
Your creditors can’t harass you for your debts during the 12 month period
Although a DRO is a formal debt solution, you don’t need to appear in court
Risks of A DRO
▪️You can only qualify for a DRO if you owe less than £20,000 and live in either England, Wales or Northern Ireland
▪️You’ll need to pay the Insolvency Service a one-off, non-refundable fee of £90. If you qualify, our specialist team can help you apply
▪️You won’t be eligible if you’re a homeowner
▪️A DRO will appear on a public register and will affect your credit report negatively
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 criteria:
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 restrictions order (BRO) or undertaking (BRU);
▪️ A current debt relief restrictions order or undertaking (DRRO or DRRU);
▪️ An interim order.
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.
Cost and Fees 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. You need to pay the fee in full before your application will be looked at.
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.
Debts You Cannot Include In A DRO
Most debts are included in a DRO. This includes household utility bills, council tax and consumer debt like credit and store cards. Some debts are called ‘excluded debts’. This means they’re not included in your DRO. The most common excluded debts are:
▪️Budgeting and Crisis Loans from The Social Fund
▪️Debts secured against an asset you own
▪️Damages or fines a court has ordered you to pay
▪️Unpaid TV license fees
▪️Any debts that you incur after the DRO is granted
▪️Fines for Drug Offences
DRO On My Credit Report?
A DRO will impact your credit record for a period of six years. This is because your credit report looks back over the past six years of your borrowing history. A DRO will therefore impact future credit applications. When you apply for credit, companies look at your credit information to decide whether to lend to you. Learn more about how you can access your free report here it will give you an idea of how companies see you, and how likely they are to approve your applications.
If you have a DRO and wish to apply for credit of £500 or more, you must inform the lender of your DRO.
What Happens When The DRO Finishes?
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 Insolvency Register, when your DRO (moratorium period) has finished, 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.