Bankruptcy or Debt Relief Order
Comparing the two debt solutions
Below we’ve compared various elements between the two solutions.
Similarities
Key similarities include:
Duration: The process for both of these solutions lasts 12 months, but both will be reflected on your credit file for 6 years – during this time you will struggle to obtain credit
Debts included: Most of your debts can be covered by both Bankruptcy and DROs, and will be written off upon completion of each solution
Process: There’s a similar process for each of these solutions – your application will be considered by an Official Receiver within the Insolvency Service to be approved
Differences
Key differences include:
Assets: In Bankruptcy, your assets may be sold in order to pay your creditors, whereas a DRO will require you to have minimal assets, so these aren’t at risk.
Homeowners: A DRO is only designed for those who do not own their own home, but Bankruptcy may be suitable whether you own your home or not.
Fees: Bankruptcy applications cost £680. If your application is not approved, this fee will be refunded. There is no fee to apply for a Debt Relief Order (DRO).
Qualifying Criteria
Bankruptcy
- The £680 fee needs to be paid in full before your proceedings can commence, either in instalments or a lump sum.
- If you have a disposable income you may be required to make payments for 36 months.
- If you have assets they may be sold to repay your debts.
Debt Relief Order
- You must not be a homeowner, or own assets in excess of £2,000.
- Your overall debt level must be no more than £50,000 and a disposable income of £75 maximum.
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