Debt Relief Order
What is a Debt Relief Order?
A Debt Relief Order (DRO) is an Order that is made by the Official Receiver, who is a civil servant and an official of the Court. It is one way to deal with your debts if you owe less than £20,000, don’t have much spare income and don’t own your home.
To get a DRO:
- your debts must not exceed £20,000;
- your assets must not exceed £1,000 (certain assets do not count, for example clothing, furniture and a vehicle worth less than £1,000); and
- your surplus income must not exceed £50 a month after paying your essential personal and household spending.
While a Debt Relief Order (DRO) is in force you don’t have to make any payments towards the debts included in your DRO.
At the end of the DRO period, usually around a year, the debts included in the DRO will be written off.
- A debt relief order can be a low cost alternative to bankruptcy
- You don’t pay anything towards your debts for 12 months and after that they will be written off.
- Your creditors can’t pursue you for your debts during the 12 month period
- Although a Debt Relief Order (DRO) is a formal debt solution, you don’t need to appear in court
- A DRO is only available if you owe less than £20,000 if you live in England or Wales or less than £15,000 in Northern Ireland
- You’ll need to pay the Insolvency Service a one-off fee of £90. If you qualify, our specialist team can help you apply
- You can’t apply if you’re a homeowner
- A Debt Relief Order (DRO) will appear on a public register and will affect your credit report negatively
DRO help and advice
If you think you may be eligible and that a DRO is right for you give Creditfix a call. You can speak with one of our advisers and find the best debt solution for your situation. Call us now for immediate and confidential free debt advice on 0808 208 5198 or complete the form. We can start to work through our debt problems as soon as you contact us.
Debt Relief Order Frequently Asked Questions
You can only apply for a DRO through a special adviser called an ‘approved intermediary’. It is not possible to apply directly to the Official Receiver yourself. You must get advice from an approved intermediary first, and if they agree that a DRO is right for you, they will give you advice and make the application on your behalf.
Applications are sent to the Official Receiver's office through a special on-line system. There is no court hearing. The official receiver will decide whether to grant your application for a DRO. They can ask you for more information and you must be as helpful as you can.
The official receiver will also ask a credit reference agency for information about your credit file. This will help them to check the details that you have provided in your application.
If the official receiver approves your application, they will send you a letter to confirm that you have been given a DRO. The official receiver will also send the order to all the creditors listed in your application.
All the debts that are included in the order are put on hold for 12 months. This is called the ‘moratorium period’.
If your circumstances change at all during the DRO period you must tell the official receiver. A change in circumstances includes any increase in your income during the DRO period or
any additional money or valuables that you come to own, such as money left to you in a will.
You also have a duty to report any of the following changes of circumstances to the official receiver, even if the moratorium period is over:
• anything that you realise was wrong in your DRO application
• anything you realise you missed out from your DRO application
• if you realise that you didn't actually qualify for a DRO because something changed between making your application and the official receiver making the DRO.
If your income increases during the DRO period, it may put you in a position where you're able to make contributions towards your creditors. This might mean that the official receiver could stop or revoke your DRO. If this happens near the end of your DRO, the period can be extended for up to three months to let you come to an arrangement with your creditors before the DRO is revoked.
If your circumstances do not change during the 12 month moratorium period then at the end of the period you are free from the debts that are listed in the DRO.
• You are not permitted to borrow £500 or more without telling the creditor about the DRO
• You can’t get involved in promoting, managing or setting-up a limited company, or be a company director, without getting permission from the court
• Should you have a business under a different name from the one under which you got the DRO, you’ll have to tell everyone you do business with the name you used when you got the DRO
• while the DRO is in force, and for three months afterwards, your details will appear on the Insolvency Service’s Individual Insolvency Register, which can be viewed by anyone.
When you have completed the application with your intermediary they will send you a copy of the application to read along with a special bar code. This bar code will enable you to make payments towards the £90 fee.
You can make payments by cash only using your local Payzone. Payzone can be found in newsagents, petrol stations and corner shops. You can also pay in cash at your local post office.
You can pay the fee in as many instalments as you like, but there are strict time limits for you to do this. Under the DRO rules, you will be allowed a maximum of six months to pay your fee in full from when your online application began.
You won't get your money back if your application is turned down, so it's important to make sure you're eligible to apply for a DRO before you pay the fee.
Your DRO will show up on your credit reference file. It can reduce your chances of getting credit from some lenders, as it shows you've struggled to keep up repayments before.
You're not allowed to get credit for £500 or more without telling the lender that you have a DRO. A lender might change their mind about offering you credit, when they see a DRO registered on your credit file.
The note of your DRO stays on your credit file for up to six years after the date the DRO was made. This means it could be some time before you can get credit in the future.
You might also struggle to open a new bank account during the DRO period and for some time after it has ended.
If you need a new home while you've got a DRO, you could find that your options are limited. Many private landlords and letting agencies will insist on credit checks when you apply for a tenancy, and because the DRO will show up on your credit report, you may be turned down or charged higher fees.
If you're not comfortable with how a DRO can affect your credit rating, you might want to think about a different debt solution.