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Are you struggling to pay your debt?
Debt Relief Order
If you’re struggling to make repayments and you qualify for a debt relief order (DRO), your creditors could freeze your debts and agree to write them off after one year.
We provide IVAs by our licensed insolvency practitioner regulated by the Insolvency Practitioners Association. We provide information about all debt solutions but we do not provide advice as we are not regulated by the Financial Conduct Authority.
Am I Eligible for Debt Relief Order?
To be eligible for a DRO, you must meet these criteria:
- Your disposable income post debt repayment is £75 or less
- You do not have a mortgage or own your residence
- You do not owe more than £50,000 in unsecured debt
- You’ve lived or worked in England or Wales in the last 3 years
- You cannot make the minimum payments offered by your original creditor
- You do not own any assets with a value of over £2,000
- Your car, if you own one, has a value of less than £4,000
- You’ve not had a DRO in the last 6 years
Similar to Bankruptcy, a Debt Relief Order is a debt solution that is used in the direst situations. It is an option given to those who can’t afford to go Bankrupt, have very little to pay off the debt, and has no remaining expenditure which they would use for life’s essentials.
You could consider an IVA if...
- You owe £6,000 or more?
- Your debt is hard to manage?
- You can afford £100 or more?
If you’re struggling with unaffordable debt you could be eligible for professional debt help.
UK residents have a right to debt help and there are several tried and tested debt solutions that can help not only to write off debt but also reduce pressure from creditors and freeze interest and charges.
Debt help solutions such as an Individual Voluntary Arrangement (IVA) can be a positive way to manage problem debt.
If the answer is “Yes” to the above questions Money Advice could hold the key to your debt-free future as you could be eligible for legislated debt help to ease the pressure and write off part of what you owe.
- DEBT FORGIVENESS
Your creditors are legally obliged to write off any outstanding balances upon completing your IVA. - REALISTIC PAYMENTS
The amount you pay towards your IVA is based on what you can afford each month. - PROTECTS YOUR ASSETS
An IVA stops your creditors from taking recovery action against you.
Take a look at our online IVA Calculator tool for an idea of how much debt you could write off with an Individual Voluntary Arrangement.
A typical example of an IVA*
- Personal unsecured debt: £39,500
- Number of lenders: 5
| Loans | £17,000 |
| Overdrafts | £3,000 |
| Credit cards | £13,500 |
| Store Cards | £4,500 |
| Utility Bills | £1,500 |
| Total Owed | £39,500 |
Your monthly debt repayments:
£689
Previous
£137
New
DEBT REDUCED BY 78%
*A debt write-off amount of around 78% is realistic based on the average figures of IVA clients between June 2023 to June 2024. We assess each customer individually based on their circumstances and payments to the IVA are based on what is realistic and affordable.
What’s a Debt Relief Order?
A Debt Relief Order (DRO) is a scheme designed for those with debts up to £50,000 and less than £75 disposable income each month.
With a DRO, your debts are frozen for 12 months, during which time your creditors can’t demand money from you or add interest. The debt gets written off if your circumstances have not improved at the end of the 12 months. It is a form of insolvency; your name will be recorded on the insolvency register.
It is a scheme for non-homeowners and people with very few assets so their belongings can not be sold to repay creditors. You must have no more than £2,000 worth of assets to qualify for a DRO.
What Debts Can Be Included In a Debt Relief Order?
Most debt can be included in a DRO. Some main debts that are included are:
- Credit card debt
- Hire Purchase arrears
- Council Tax arrears
- Arrears on utility bills eg. Gas / Water / Electricity
- Benefit Overpayments
- Overdrafts
- Payday loans
What Debts Can’t Be Included in a Debt Relief Order?
Most debts are included, however, there are certain circumstances where your debts are not covered and you will have to keep up payments towards. These include:
- Any debts that have been accrued under
- fraudulent circumstances
- Court Fines
- Student Loans
- Child Maintenance
Advantages and Disadvantages of a Debt Relief Order
There are many factors to consider before applying for a DRO. Below we’ve listed some advantages and disadvantages:
Advantages
- If your circumstances remain the same, you can write off most of your debt and be debt-free after 12 months.
- Your creditors freeze interest and charges and can not chase you for repayments for 12 months.
- It is designed for those with few assets and no home, so you aren’t likely to be made to give your possessions up.
- A DRO covers most debts.
- It is a formal agreement – so once approved, your creditors have to stick with it and you are protected.
Disadvantages
- A DRO will hurt your credit rating and remain on your credit file for 6 years.
- If your circumstances change within the 12 months, your DRO may be revoked and you’ll have to look at new solutions to repay your debts. Your creditors may also resume charging interest and contacting you.
- You can’t apply if you’ve had a DRO or other form of insolvency within the last 6 years.
- Your assets will be assessed, and if the total is worth more than £2,000, you will not qualify.
What Will I Have To Pay?
There is no fee to apply for a DRO.
If your application is approved, you don’t have to make payments towards your eligible debts throughout the DRO, which lasts 12 months. At the end of the DRO, your debts may be written off, so you will not have to make any further repayments.
If your situation has improved at the end of the DRO, then this may be revoked and you will have to look into alternative ways of paying off the debts. This means the creditors may start contacting you and interest will begin to grow again.
You will also have to ensure that you keep up payments to any other debts that are not included in the DRO, such as child support, so as not to encounter further financial problems.
Is a Debt Relief Order Right For Me?
You must know precisely what you are signing up for with any debt solution. We recommend researching different debt solutions or seeking professional advice before making any decisions.
A DRO may be an option if you are a non-homeowner with a low debt level and can not afford to make any repayments towards your debts.
Further factors affecting your application’s success are not owning assets exceeding a total value of £2000 and no previous DRO or other insolvency agreements within the last six years.
What are the steps?
Seek professional guidance
Speaking with financial experts and discussing in detail your current situation will allow them to decide whether you match the criteria for a DRO. If your financial situation proves to be suited for a DRO, you should be advised of alternative solutions.
Your DRO Application Form
After you have been proved to suit a DRO, you will then have to fill out an application form. Once completed, the form will then sent to the Insolvency Service for assessment.
The Insolvency Service
Once the Insolvency Service has granted you your DRO, your advisor will be in contact with your original creditors to inform them of the changes. For the following 12 months, they will not be able to demand repayments from you, and your debt will be written off.
12 Month Review
After you the DRO’s 12 month period has ceased, your financial situation will be reviewed. If it has not improved and you are still not in a position to pay, your outstanding debts will be then made invalid. If things have improved either during or after the 12 months, then your DRO will be cancelled.
IVA Support
We're committed to helping you
Start today
Step 1
Get in touch
Private & Confidential Support
The first step is the hardest but you’re in the right place – talking with one of our friendly assessors can help get the ball rolling.
Step 2
Explore your options
Debt help without judgment
Talk to us about your situation, and we’ll let you know if an IVA may be a potential solution for you.
Step 3
Take action
No Obligation Service
We can carry out a suitability assessment, and if you qualify for an IVA we can help put together an application with you. There’ll be no obligation and we’ll be on hand to answer any questions you may have along the way.
How Can I Apply for a DRO?
In order to apply for a debt relief order, you need to go through a specialist who will assess your personal and financial situation to work out whether you qualify.
You will need to provide information such as:
- Your income
- Debt levels
- Any assets you might have
Check if you qualify
Debt Relief Order Vs. Other Solutions
Both of these solutions are very similar in nature, with the goal being writing off your eligible debts. There are a few key differences between these:
- A DRO is for non-homeowners and people with very few assets. In Bankruptcy, your home or assets may be used to sell so your creditors can get money back from the proceeds.
- A DRO is for people with £50,000 of debt or less. For Bankruptcy, there is no cap for debt level that can be included.
- Your creditors are able to file for Bankruptcy for you if you have not kept up repayments. For a DRO, only you can apply for one yourself
Here’s some further information to consider if you are looking into a Debt Relief Order or Bankruptcy.
Both of these options can be good for those who are eligible. Here are some of the differences between the two:
- There is no debt level limit for an IVA, whereas with a DRO you require £50,000 or less.
- Your debts are frozen for a year on a DRO, then written off only if your circumstances don’t change. With an IVA, you make affordable monthly payments for the duration and your debts are written off after 5 years typically
- In both cases, any interest and charges are frozen for the duration.
- A DRO can help those who have no means of repaying their debts. If you do have disposable income that can go towards your debt, then you may be more likely to be accepted on an IVA.
Here’s some further information to consider if you are looking at an IVA or Debt Relief Order
- A DRO is a formal solution, so your creditors have to stick to it for the duration. A Debt Management Plan (DMP) is informal, so you or your creditors can cancel at any time, and no one is obliged to uphold it.
- A DRO freezes your debts for a year, whereas a DMP consists of repayments to your creditors.
- Your debts will be written off following the 12 month duration of the DRO, but with a Debt Management Plan you will continue to pay off your total debt level.
Here’s some further information to consider if you are looking into a Debt Relief Order or Debt Management Plan.
Money Advice help over 3,000 people in the UK every year
Our team of experts help thousands of families get their finances back on track with an IVA.
Is an IVA right for you?
We can discuss your eligibility for an IVA
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To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.