Debt Relief Order

If you’re having difficulty making repayments and qualify for a Debt Relief Order (DRO), your creditors may freeze your debts, allowing them to be written off after one year.

What Is a Debt Relief Order?

A Debt Relief Order (DRO) is a financial solution for individuals with debts up to £50,000 and a disposable income of less than £75 per month.

Under a DRO, your debts are frozen for 12 months, during which creditors cannot demand payments or add interest. If your financial situation hasn't improved by the end of this period, the debts will be written off.

As a form of insolvency, your name will be added to the insolvency register. This scheme is intended for non-homeowners and those with very few assets, as it prevents the sale of belongings to pay creditors. To qualify for a DRO, your total assets must not exceed £2,000.

Which Debts Can Be Included in a Debt Relief Order?

Most types of debt can be included in a Debt Relief Order (DRO). The main debts that can be included are:

Credit card debt
Hire purchase arrears
Council tax arrears
Arrears on utility bills (e.g., gas, water, electricity)
Benefit overpayments
Overdrafts
Payday loans

Which Debts Cannot Be Included in a Debt Relief Order?

While most debts can be included in a Debt Relief Order (DRO), certain debts are not covered and require you to continue making payments. These include:

Pros and Cons of a Debt Relief Order

Advantages and Disadvantages of a Debt Relief Order (DRO)

Advantages

If your circumstances remain unchanged, you can eliminate most of your debt and achieve debt-free status after 12 months.
Your creditors will freeze interest and charges and cannot pursue you for repayments during this period.
The DRO is tailored for individuals with few assets and no home, reducing the likelihood of losing personal possessions.
It covers most types of debt.
As a formal agreement, once approved, your creditors must adhere to its terms, providing you with protection.

Disadvantages

If your circumstances remain unchanged, you can eliminate most of your debt and achieve debt-free status after 12 months.
Your creditors will freeze interest and charges and cannot pursue you for repayments during this period.
The DRO is tailored for individuals with few assets and no home, reducing the likelihood of losing personal possessions.
It covers most types of debt.
As a formal agreement, once approved, your creditors must adhere to its terms, providing you with protection.

What Will I Need to Pay?

There is no fee to apply for a Debt Relief Order (DRO). If your application is approved, you won’t need to make payments toward your eligible debts during the 12-month DRO period. At the end of this period, your debts may be written off, meaning you won’t have to make any further repayments. However, if your financial situation improves before the DRO concludes, it may be revoked, and you would then need to explore alternative repayment options. In such a case, creditors may resume contact, and interest on your debts will start to accrue again. Additionally, you must continue making payments on any debts not covered by the DRO, such as child support, to avoid further financial difficulties.

Is a Debt Relief Order Suitable for Me?

It’s essential to fully understand what you are committing to with any debt solution. We recommend researching various options or seeking professional advice before making any decisions.

A Debt Relief Order (DRO) may be a viable choice if you are a non-homeowner with a low debt level and cannot afford to make repayments.

Additionally, for your application to be successful, you should not own assets valued over £2,000, and you must not have had a previous DRO or any other insolvency agreements within the last six years.

Am I Qualified for a Debt Relief Order?

To qualify for a Debt Relief Order (DRO), you must meet the following criteria:

Your disposable income after debt repayments is £75 or less.
You do not have a mortgage or own your home.
Your total unsecured debt does not exceed £50,000.
You have lived or worked in England or Wales within the last three years.
You cannot afford the minimum payments set by your original creditor.
You do not own assets valued over £2,000.
If you own a car, its value must be less than £4,000.If you own a car, its value must be less than £4,000.
You have not had a DRO in the past six years.

Like Bankruptcy, a Debt Relief Order (DRO) is a debt solution for individuals in critical financial situations. It is designed for those who cannot afford to declare bankruptcy, have minimal debts to repay, and lack disposable income for essential living expenses.

Become debt-free

Are you finding it hard to manage your debt?

What to expect?

1

Consult Professional Advice

Consulting with financial experts and thoroughly discussing your current situation will help them determine if you meet the criteria for a Debt Relief Order (DRO). If your financial circumstances align with the requirements for a DRO, they will also inform you about alternative solutions available to you.

Your Debt Relief Order (DRO) Application Form

Once you have been deemed eligible for a Debt Relief Order (DRO), you will need to complete an application form. After filling it out, the form will be submitted to the Insolvency Service for evaluation.

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The Insolvency Authority

Once the Insolvency Service approves your Debt Relief Order (DRO), your advisor will notify your original creditors about the changes. For the next 12 months, they will be unable to demand repayments from you, and your debts will be written off.

3

Annual Review

After the 12-month period of the Debt Relief Order (DRO) has ended, your financial situation will be assessed. If your circumstances have not improved and you are still unable to make payments, your outstanding debts will be deemed invalid. Conversely, if your financial situation has improved either during or after the 12 months, your DRO may be canceled.

4

How Can I Submit an Application for a Debt Relief Order (DRO)?

To apply for a Debt Relief Order (DRO), you must consult a specialist who will evaluate your personal and financial circumstances to determine your eligibility.

You will need to provide information such as:

RMS FINANCIAL: Debt Relief Order vs. Other Solutions

Debt Relief Order Vs. Bankruptcy

Both of these solutions are quite similar in nature, with the primary goal of writing off your eligible debts. However, there are a few key differences between them: A Debt Relief Order (DRO) is intended for non-homeowners and individuals with very few assets. In contrast, bankruptcy may involve the sale of your home or assets so that creditors can recover funds from the proceeds. A DRO is applicable for individuals with £50,000 of debt or less. In bankruptcy, there is no cap on the debt level that can be included. Your creditors can file for bankruptcy on your behalf if you have not kept up with repayments. However, only you can apply for a DRO. Here’s some additional information to consider if you are looking into a Debt Relief Order or bankruptcy.

Debt Relief Order Vs. IVA

Both of these options can be good for those who are eligible. Here are some of the differences between the two: There is no debt level limit for an IVA, whereas with a DRO you require £50,000 or less. Your debts are frozen for a year on a DRO, then written off only if your circumstances don’t change. With an IVA, you make affordable monthly payments for the duration and your debts are written off after 5 years typically In both cases, any interest and charges are frozen for the duration. A DRO can help those who have no means of repaying their debts. If you do have disposable income that can go towards your debt, then you may be more likely to be accepted on an IVA. Here’s some further information to consider if you are looking at an IVA or Debt Relief Order

Debt Relief Order Vs. Debt Management Plan

A Debt Relief Order (DRO) is a formal solution, meaning your creditors are obligated to adhere to it for the duration of the arrangement. In contrast, a Debt Management Plan (DMP) is informal, allowing either you or your creditors to cancel it at any time, with no obligation for anyone to uphold it.

A DRO freezes your debts for a year, while a DMP involves ongoing repayments to your creditors. After the 12-month period of the DRO, your debts will be written off, whereas with a Debt Management Plan, you will continue to pay off your total debt amount.

Here’s some additional information to consider if you are exploring a Debt Relief Order or a Debt Management Plan.

RMS Financial assists over 3,000 individuals in the UK each year.

Our team of specialists helps thousands of families regain control of their finances through an IVA.

Is an IVA the right choice for you?

We can evaluate your eligibility for an IVA.

Would you rather discuss this later?

We are here to provide support in helping you find a solution.