How does a Debt Relief Order (DRO) work?

When you seriously can’t afford to repay your debts then one option is to apply for a debt relief order, or DRO. This is a cheaper alternative to going through bankruptcy procedures if you have debts of less than £15,000, have a low income, little equity and there is no prospect of things improving. It is effectively a way of clearing debt within a year without having to attend court, pay your creditors or declare yourself bankrupt. This type of order is approved by the Insolvency Service and is part of a debt management plan.

How does the DRO work?

The debt relief order will help to fast track some of the less complicated debt cases through Court without requiring you to attend. During the period of the DRO, you won’t have to make any payments towards the debts listed in the order, which normally lasts twelve months. The creditors of these debts won’t be able to take any action against you during this time and after the 12 months the debt will be cleared.

How to apply for a DRO

You can apply for a DRO online with an official intermediary who will help you complete your application. There is a cost of £90 which can be paid in instalments over six months. When the Official Receiver receives your application form and fee, the order will usually be made administratively without having to go to court if all the requirements are met.

There are strict criteria when applying for a debt relief order. You won’t be able to apply if you have a vehicle which is worth more than a thousand pounds or have any savings or any assets worth over three hundred pounds.
Furthermore, only certain type of debt (also known as qualifying debts) will be considered in a debt relief order including:

  1. Loans, overdrafts and credit cards
  2. Council tax rent and telephone utilities,
  3. Social fund loans and benefit overpayments
  4. Conditional sale or hire purchase agreements
  5. Buy now and pay later agreements.

You will still have to repay any debts that the debt relief order does not include.. You can only apply for a debt relief order once every six years.

What happens during the DRO period?

You will still need to pay your usual household expenses such as rent, gas, electricity, Council Tax and water charges. Other debts that are not included in the debt relief order will also have to be repaid. You will have to tell the official receiver about any other new debts you have for the duration of the order.

Things to Consider before taking out a DRO

There are consequences of a debt relief order as part of a debt management plan which should be considered before taking one on. Your credit file will show the debt relief order for six years and may harm your chances of getting future credit. You may also find it more difficult to open a bank account once you have a DRO. There will be also strict restrictions on your financial activity during the period of the Order.
There are benefits to a debt relief order too. The main one is that your creditors will not be able to get their money back through legal action. When the debt relief order comes to an end all of the debts listed in the order will be cleared.
You may have other options for dealing with your debts besides applying for a debt relief order. A debt advice company will be able to give you further information on debt relief orders, debt management plan and bankruptcy procedures.

For further information on debt relief orders we suggest the following resources / services:


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