Debt Relief Order

A Debt Relief Order (DRO) is a formal insolvency process that can help you deal with your debts if you owe less than £30,000, don’t own your home, and have less than £75 disposable income.

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This Guide Includes

1. What is a Debt Relief Order?

2. Criteria for a Debt Relief Order

3. What are the advantages of a DRO?

4. What are the disadvantages of a DRO?

5. Debts that can be included in a DRO

6. How to apply for a Debt Relief Order

7. Windfall During a DRO

8. Is my home at risk if I take out a Debt Relief Order?

9. DRO Advice

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What is a Debt Relief Order?

A Debt Relief Order, or DRO, is a formal legally binding debt solution and is most suited for those who own little assets of value and have a low level of income. It is sometimes viewed as an alternative to Bankruptcy or IVA but the strict criteria can be difficult to meet.

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You must have unsecured debt of less than £30,000, not a homeowner, and very few assets to be eligible. A DRO is available in England, Wales, and Northern Ireland. Scottish residents have a similar option available to them, known as a Minimal Asset Process (MAP).  After the fixed period, usually, 1-year, qualifying debt will be wiped away, giving you a fresh start.

Before you apply for any debt solution you should consider the advantages and disadvantages of the solution and how these may impact you. Our experts will be more than happy to walk you through these and explain them in detail.

Criteria for a Debt Relief Order

  • Debts of less than £30,000 and live in England & Wales. Debt Relief Orders are not available if you live in Scotland.
  • Assets of less than £2,000.
  • A car value of less than £2,000.
  • A monthly surplus of less than £75.
  • You must not be subject to any other insolvency procedure and cannot have had a DRO in the previous 6 years.

What are the advantages of a DRO?

  • The fee of £90 is more affordable than some other debt solutions.
  • A DRO lasts for 12 months.
  • You are not required to make any contributions during that time.
  • Interest and charges are frozen.
  • At the end of this, your debt is written off.
  • You will keep any asset, including a car, providing it is not valued at £2000 or more.

What are the disadvantages of a DRO?

  • Your details will be included on the Insolvency Register and will appear on your credit file for 6 years after the date your DRO started.
  • As a formal arrangement, you cannot apply for a DRO yourself – it must be done through an authorised representative.
  • If you have a favourable change in circumstances during the 12-month duration the DRO may be revoked.
  • You cannot enter into a DRO if you have an existing IVA, bankruptcy order or own your property.
  • Once you’ve applied for a DRO and have had a successful application, you won’t be able to apply again for another six years. This applies even if your previous DRO was cancelled after approval.

Debts that can be included in a DRO

  • Arrears on household Bills
  • Credit Card Debt
  • Payday Loans
  • Overdrafts
  • Store Cards
  • Hire Purchase (HP)
  • Items bought on finance
  • Loans from friends and family

Some debts can’t be included in a DRO, such as court orders permitting child support, child maintenance, court fines, or student loans. If you are having trouble making payments to any of these, they must be dealt with separately.

If any debts have amounted due to fraud, these can’t be included and will still have to be paid once the DRO has finished.

How to apply for a Debt Relief Order

If you have decided that a DRO is the right option for you, we will put you in contact with a professional insolvency practitioner, should you need further help or advice with the mediation process, we’ll be right here to help.

A Debt Relief Order costs £90, the fee will be paid directly to the Insolvency Service. The fee you pay is non-refundable. You’re only able to apply for a DRO once every six years. It’s important that the information you provide on your application is accurate.

Once you have submitted your application and paid the £90 fee, the Debt Relief Order will be granted by an Official Receiver if you’re eligible.

Windfall During a DRO

Most DROs will include a ‘windfall clause’, which means that if you come into any money during the course of your DRO, you will have to declare it to your insolvency practitioner as a source of income. These windfalls can include things like a pay increase at work. If you’re lucky enough to win the lottery or unfortunate enough to lose a family member, any winnings or inheritance could be given to your debt holders as part of this windfall clause.

Is my home at risk if I take out a Debt Relief Order?

Homeowners are not eligible for a Debt Relief Order. If you are a homeowner and you’re struggling with debt, we recommend speaking to one of our advisors to see what alternative options are available to you.

DRO Advice

If after reading this, you think that a Debt Relief Order would be the right solution for you, contact us to discuss this solution in more detail.

Our expert advisers will give you advice and provide you with all the relevant information needed for you to make a decision that’s best for your situation.

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