Debt Relief Order

A Debt Relief Order (DRO) is a debt solution for individuals with low value assets, low disposable income and debts of less than £50,000.

With a DRO, your debts are frozen for 12 months, during which time your creditors can’t demand money from you or add interest and charges. The debt gets written off if your circumstances have not improved at the end of the 12 months. It is a formal insolvency solution; your credit rating will be affected and your name will be recorded on the insolvency register.

Most unsecured debt can be included in a DRO. Examples of some of the 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

Although most unsecured debts are included, there are certain debts which cannot be included. These include:

• Any debts that have been accrued under
• fraudulent circumstances
• Court Fines
• Student Loans
• Child Maintenance

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 cannot contact you for repayments for 12 months.
• It is designed for those with few assets and no home, there are no monthly repayments or fee to apply.
• A DRO covers most unsecured debts.
• It is a formal agreement – so once approved, your creditors have to stick with it and you are protected.

Disadvantages

• A DRO will negatively impact your credit rating and remain on your credit file for 6 years.
• Your details will be available on the insolvency register, which is public.
• If your circumstances change within the 12 months, your DRO may be revoked and you’ll have to look at an alternative debt solution to repay your debts. Your creditors may also resume charging interest and contacting you.
• You can’t apply if if you have been subject to a DRO in the last 6 years.
• Your assets will be assessed, and if the total is worth more than £2,000, you will not qualify.

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 improves during the DRO, then this may be revoked and you will have to look into alternative ways of paying off the debts. This means your creditors may resume contacting you and interest will begin to grow again.

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.

In order to apply for a DRO, 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 and expenditure.
• Details of your debts
• Any assets you might have