What is a Debt Relief Order?
A Debt Relief Order (DRO) is a formal insolvency process that can help you with your debt if you don’t own your own home, owe less than £20,000 and have very little spare income.
DROs are an alternative to bankruptcy and will usually last for one year. Your creditors are unable to recover their money without permission from the courts once you are in a DRO.
Once you have been discharged from your DRO, all of the debts listed will be cleared.
Disadvantages of a DRO
- DROs will stay on your credit file for six years and will be on a public record for 15 months
- There is a one off fee when applying for a DRO
- You could find difficulty opening a bank account once you have a DRO
- You will be required to pay back creditors if your financial situation improves
- You cannot obtain credit over £500 without informing the lender that you have a DRO
Advantages of a DRO
- DROs usually only last one year
- Once the DRO ends any debts included within it will be written off
- DROs are a low cost alternative to bankruptcy
- Your creditors cannot take any action against you for the money you owe
Is a DRO right for me?
- You must be unable to pay back the debts you owe
- You must owe less than £20,000
- You must have less than £50 spare income each month after your normal household expenses
- You do not own your own home
- You have less than £1,000 worth of assets, excluding your car which you own as long as its value is less than £1,000
- You have not had a DRO in the past six years and are not currently in any other formal insolvency procedure such as bankruptcy or an IVA
- You have lived and worked in England for the past three years
Applying for a DRO
An application must be made to the Official Receiver’s Office through an authorised intermediary. There is an Official Receiver’s fee of £90. Intermediaries are not allowed to charge you any form of fee for submitting your DRO application to the Insolvency Service.