Comparing the two debt solutions

Both Bankruptcy and Debt Relief Orders (DROs) have a similar process, however, they each have their own requirements in order for you to qualify.

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

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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: The fee is higher to apply for Bankruptcy, at £680. If your application fails, you will get this money back. For a DRO, the fee is lower at £90 but this would not be returned to you if your application fails

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Qualifying Criteria

Bankruptcy

  • The £680 fee needs to be paid in full before your proceedings can commence, either in instalments or a lump sum.
  • You must be able to demonstrate that you will struggle to pay back your debts.
  • You must be prepared to lose some of your big assets, so these can be sold to pay back creditors – this includes your home, car and other expensive belongings.

Debt Relief Order

  • Your £90 fee must be paid in full before your application will be considered, either in instalments or in one go.
  • You must not be a homeowner, or own assets in excess of £2,000.
  • Your overall debt level must be no more than £30,000 and a disposable income of £75 maximum.

Can I apply for both Bankruptcy and a DRO?

Either of these debts will involve all of your eligible debts, so if you are accepted on to one, there would be no need for you to apply for the other. If you apply for a DRO but this is rejected for any reason, then you may want to consider Bankruptcy or another solution.

It’s important to be certain you want to enter into either of these solutions before making an application, as these have very big impacts on your life – take into account what you need in order to qualify.

It’s always a good idea to seek expert debt advice before making any commitments, so feel free to speak to us here at Money Advice – we can make sure you have a clear understanding of what solutions you qualify for.

bankrupcy vs dro

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