Debt Relief Orders
A Debt Relief Order (DRO) is a way of dealing with your debts if you can’t afford to pay them. It means you don’t have to pay certain kinds of debt for a specified period (usually 12 months).
At the end of the DRO period, the debts included in it will be written off (‘discharged’) and you won’t have to pay them.
If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended.
If your circumstances change so that you are able to pay some or all of your debts, your DRO may be revoked so you can arrange to pay your creditors (the people or companies you owe money to).
To be eligible for a DRO, you must meet these criteria:
- you owe £20,000 or less
- you have less than £50 to spend each month, after paying tax, national insurance and normal household expenses
- you’ve lived or worked in England or Wales in the last 3 years
- your assets aren’t worth more than £1000 in total
- you’ve not had a DRO in the last 6 years
You won’t be eligible if you are involved in bankruptcy proceedings or any other formal insolvency procedure. However, if one of your creditors has asked a court to make you bankrupt, you may ask the creditor for permission to apply for a DRO instead.
Our One Money team can explain the pros and cons of a Debt Relief Order to find out if it is the best option for you. If it is we can make the application for you so please contact us.
Applying for a DRO
You can only apply for a DRO through an ‘approved intermediary’. This is an authorised debt adviser, who will make the application on your behalf. We have an intermediary who can do this for you.
The application is completed online and sent to an official receiver. This is an officer of the bankruptcy court, who will decide if a DRO should be granted.
Costs
The official receiver’s fee is £90. This will not be refunded once a decision has been made, even if you are not granted a DRO.
The fee must be paid in cash but can be paid in installments; you will have up to 6 months to pay it all but the application cannot be made until you do.
What happens next?
If your DRO is granted the official receiver will:
- Write to you and the intermediary to inform you that the DRO has been made and explain the restrictions and duties that it imposes on you.
- inform all the creditors listed in the DRO that it has been made, and that they can’t ask you to repay your debt to them
The DRO will usually last for 12 months. You must not make payments to any of the creditors listed in your DRO during this time. If a creditor asks for payment, you must tell them about the DRO.
During your DRO period you must tell the official receiver about any money or assets you receive, or any increase in your regular income. If you are able to start paying off your debts the DRO may be revoked.
Your DRO is added to the Individual Insolvency Register – it will be removed three months after the DRO ends.
If your DRO is not granted the official receiver will write to both you and the intermediary to say why the DRO was refused
You can appeal this decision if you disagree with the reason given.
You will not get your £90 refunded.
If we do your DRO we will advise you if we do not think you are eligible so this should not be an issue.
Debts you will still have to pay
Some debts cannot be included in a DRO and you will still have to pay them.
These are:
- child maintenance, or anything you owe under family proceedings
- student loans
- budgeting and crisis loans from the Social Fund
- debts secured against an asset you own
- fines for drug offences
- damages or fines a court has ordered you to pay
- unpaid TV licence fees
- any debts you incur after the DRO is granted
You must also continue to pay any regular commitments like rent and bills.
Restrictions placed on you
While your DRO is in place you will have to follow some ‘restrictions’. This means you cannot:
- borrow more than £500 without telling the lender about your DRO – whether you’re borrowing on your own or with someone else
- act as a director of a company
- create, manage or promote a company without the court’s permission
- manage a business with a different name without telling anyone you do business with about your DRO
- apply for an overdraft without telling your bank or building society about your DRO
- write cheques that are likely to bounce
It’s a criminal offence to break the restrictions - you may be prosecuted if you do so.
If you apply for a new account with a bank or building society, they may require you to tell them about the DRO.
You cannot apply for another DRO for 6 years from the date your DRO was approved.
When the restrictions can be extended
If the official receiver finds that you have been dishonest about something related to your DRO; or you are to blame for your financial position, the restrictions listed above may be extended for 2 to 15 years. This extension is called a Debt Relief Restrictions Order. The receiver must apply to the court for one to be granted.
You can volunteer to continue with the restrictions without going to court. This is called a Debt Relief Restrictions Undertaking.
When the Debt Relief Order has finished
At the end of your DRO, the scheduled qualifying debts listed in it will be discharged and you will not have to pay them.
If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended.
You can check the date your DRO ended online using the Individual Insolvency Register.
Your credit record
Your DRO will stay on your credit reference file for 6 years from the date it was granted.
You may need to send the credit reference agencies a copy of an official document stating that your DRO has ended, if they don’t update your file automatically after 6 years.
