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What Debts are included in a DRO?


What Debts are included in a DRO?

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A Debt Relief Order (DRO) is a debt solution that essentially pauses your unsecured debts for up to 12 months, after which your debts could be written off if your circumstances haven’t changed. It is only available under quite specific circumstances, such as your surplus income being less than £50, and your car being worth less than £1,000. Similarly, the rules on what debts can be included, and later written off, are limited.

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Debts included:

  • Items bought on finance, such as buy-now-pay-later agreements
  • Credit Card debt
  • Payday loans
  • Overdrafts
  • Store Cards
  • Rent Arrears
  • Utility Arrears
  • Council Tax Arrears
  • Benefit overpayments

You must include all of your debts at the application stage, as forgotten debts cannot be added to the DRO at a later date. Your DRO could even be revoked if an unknown debt is discovered.

Hire Purchase (HP) agreements are included in the DRO, which can mean that you will lose the item that you bought using the agreement. This may not happen if it is ‘essential’, below the assets limit for a DRO (under £1,000 for a car, or under £1,000 when totalled with your other assets), or you have no arrears.

Loans from friends and family will also be included. But, be careful not to give preferential treatment to loved ones by paying them back quickly before applying for the DRO as this could result in your DRO being refused. They must be treated like any other creditor, and will not be able to take any action to collect the debt from you during the 12 months. It will also be written off with all other debts.

Debts not included:

  • Student Loans
  • Court Fines
  • Child Maintenance
  • TV License Arrears
  • Personal Injury Claims
  • Criminal Fines
  • Magistrates’ court fines
  • Social fund loans

Any fraudulent debts that you may have are treated differently. They have the worst of both worlds and will not be written off after 12 months, but are included towards the £20,000 debt limit. For more information about DROs, click here.