A debt relief order (DRO) is a formal solution for dealing with your debts and may enable you to get most of them written off. It is a solution for those who owe £30,000 or less (£20,000 or less in Northern Ireland), who don’t own their own home, don’t have much spare income or who don’t have any other assets or items of value. A debt relief order is typically only issued if it is unlikely that you will be able to clear the amount, and you meet the eligibility criteria.
A DRO typically lasts for 12 months. If it is approved, then you will stop making payments towards the debts (and any interests) listed within the DRO during that time. Once the 12 months have passed, then you will not need to pay those debts anymore. It’s important to note that a debt relief order stays on your credit file for 6 years from the date which it was approved, although this is the same for other debt relief options.
If you want to apply for a DRO, then you will need to do so through an approved debt adviser. We can help you apply for a DRO, to ensure that you meet all the requirements. We will also assess your financial situation and take a look at your debts, income, personal belongings and assets. If you aren’t sure exactly what you owe, or what your monthly expenses are, then we can help you figure this out.
Owe less than £30,000
Have valuable items or savings worth less than £2,000
Own a vehicle which is worth less than £2,000 based on the current market value
Don’t have enough money left at the end of the month to make debt repayments
Have worked or lived in England or Wales in the past 3 years
Are currently not declared bankrupt, or have an IVA or interim order
Haven’t had a debt relief order in the last 6 years
Given away assets
Sold any assets for less than their recommended value, for example if you’ve sold a car for £300, when it was worth £3,000
Prioritised paying back one creditor over another. For example, if you paid of a debt to a friend or family member, over another creditor
If we find that you are eligible for a debt relief order, then we will complete your application for you, as this cannot be done on your own. It costs £90 to arrange a debt relief order, which can be paid in installments over 6 months, but you will need to pay the full fee before the applcation is submitted. If we find that a DRO is not suitable for you, then we will look into other debt solutions that suit your current circumstances.
You can take out a debt relief order to pay towards your rent, then there are additional things to consider. If you are applying for a DRO, then it’s best to let your landlord know and keep them up to date with what is going on with the process. If you are using a debt relief order for rent arrears, then an arrangement will be set up between you and your landlord so that you can carry on paying off the arrears. This will apply no matter if you are a private or social housing tenant. Taking this approach should stop any court action being taken against you and, if you don’t keep up with repayments, then it’s possible that your landlord may start with eviction proceedings.
You should also check your tenancy agreement as you could find that you have an insolvency clause within your contract. If you take out a debt relief order, you may be in breach of your tenancy agreement and your landlord may choose to start eviction proceedings, even if you have agreed to pay off arrears. If you have rent arrears and are considering using a DRO, then it is really important that you speak with your adviser first.
A debt relief order will remain on your credit report for six years from the date which it is approved. It will also be listed on a public domain on the Insolvency Service’s register for 15 months, including details of your name and address. For the year you hold your DRO, you are unable to hold certain jobs such as being a solicitor, trustee of a charity or a director of a limited company.
If you hold power of attorney over someone else’s finances, or if someone holds power of attorney over your finances, then this would be cancelled if you are approved for a debt relief order. You can reapply for this once your DRO ends.
A DRO may be appropriate for the following debts: credit cards, overdrafts, loans, rent arrears, utility bills, benefit overpayments, hire purchase or conditional sale agreements, business debts, debts to friends and family, bills for services (such as vets or solicitors).
Lines of Credit
A DRO may not be available to cover debts including child support and maintenance payments, social fund loans, magistrates court fines, confiscation orders relating to criminal activity and student loans.
Lines of Credit
Lines of Credit
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A DRO usually lasts 1 year, then most or all debt included is written off
Interest and charges will be frozen
Legally binding, offering protection from creditors
Fees for the DRO are just £90
Your credit rating will be impacted for six years
You can’t be a homeowner
You have to have less than £75 disposable income (£50 in Northern Ireland)
Your DRO is subject to approval
There are many reasons why a DRO can be stopped, or which may lead to a DRO being objected to by a creditor. These include, but are not limited to:
Some people believe that, if you break one of the restrictions, your DRO will be cancelled. However, this is not always the case and your DRO as it is considered an offence. You may also be asked to begin making payments towards debts which were covered by the DRO, or your creditors can start to take action against you to recover what they are owed.
When looking for a debt solution, it can be difficult to find the right one for you. IVAs and debt relief orders are commonly mentioned, but there are some slight differences between the two.
IVAs are a better option for those people who might not meet the criteria for a DRO, for example, where a car is worth too much, their DI is too high or they are a homeowner. IVAs involve monthly payments being made over the space of 5 to 6 years, whereas DROs require a one-off payment of £90.
DROs are more suited to those who don’t have any assets and are unable to pay their debts. This individual will also have unsecured debts of under £30,000. A positive to a DRO is that it only lasts a year. However, it will still be mentioned on your credit file for six years.
Yes, you should expect that your debt relief order will affect your credit score. Whether you have had one in the past or are looking to get one, it can affect your credit score. Additionally, this could make it more difficult to get credit in the future, as it stays on your file for 6 years.
If your bank is listed as a creditor, your DRO adviser will contact your bank to let them know you have a debt relief order. In some cases, banks will check your bank account to see if you have been given a DRO.
If the bank is included in your DRO application, the bank will then decide whether to freeze your bank account or, create a new account with them.
No, your bank account is not monitored during or after the DRO year. All checks of your account will be completed during the DRO application process. This includes your income, your debts and what you own.
It is important during the process of your DRO application that you are transparent with the advisor. Withholding or hiding information from your DRO advisor could cause further problems with your application later on if you claim debt relief you may not have been entitled to, such as your DRO being stopped, or lead to a Debt Relief Restrictions Order (DRRO).
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