Debt Relief Order (DRO)

What is dro? Debt Relief Order is an agreement to write off debt for those with low income and with limited assets

In a nutshell, A Debt Relief Order (DRO) is a type of insolvency. A DRO order had a duration of 12 months after approval. This period is known as ‘moratorium’, during which time you won’t be required to make any repayments.

After the 12 months, if you’re still unable to repay your debts, they’ll be written off.

DROs act as a viable low-cost alternative to bankruptcy. If you consider a DRO as a debt solution, there are several important implications, so you should seek debt help advice from a reputable organisation.

DROs aren’t available in Scotland, where the equivalent is a Minimal Asset Process (MAP).

What is DRO Order suitable for?

This form of debt assistance might be the best debt help for those who have a relatively low level of debt (less than £20,000) and who own only limited assets.

Our debt expert’s opinion on the pros and cons…

Advantages of DRO Debt Relief Order

• Once your DRO order is approved, you’ll no longer be required to make any further payments to your creditors.
• If your assets total to £300 or less, and your vehicle to £1000 or less, you won’t have to sell anything to contribute toward your debts.

Disadvantages of DRO Debt Relief Order

• Your details will be stored on an online database, which is publicly searchable. You’ll also remain on the database for three months following the DRO (e.g. for a total of approximately 15 months).
• A DRO debt will remain on your credit history for six years after approval. During this period, you’ll likely find it more difficult to secure credit.
• You won’t be able to apply for a DRO if you’ve previously used another insolvency debt solution in the previous 6 years.

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Top Benefits of Debt Relief schemes

FAQs – DRO Debt Relief Order

• I’m self-employed – can I have a DRO Debt Relief Order?

Yes, as a self-employed individual you are still eligible to apply for a DRO Debt Relief Order. However, you should take care to thoroughly consider whether your income fluctuates to a point that means the proposed monthly repayment is unrealistic.

• I’ve heard that if I have more than £50 spare the Insolvency Service will reject my DRO application – is this true?

The ‘£50 rule’ relates to your income and expenditure. In short, you must have less than £50 spare per month to be eligible for a DRO application. Just because you currently have £50 at your disposal, does not mean that your income/expenditure levels won’t qualify for a DRO application.

• I declared myself bankrupt two years ago – can I apply for a DRO Debt Relief Order?

Yes – the only instances that would exclude you from DRO eligibility would be if you:

• Have an undischarged bankruptcy
• Have previously had a DRO order in the past 6 years
• Are currently in an IVA

• I’m due to retire soon. Part of my retirement will involve lump pension sums. What should I do?

If you receive a lump payment during the 12 months or your DRO, your DRO order will likely be cancelled. If you’re not able to delay your pension until the completion of the DRO, then this isn’t going to be a good debt solution for your needs. Talk to a debt advisor about your circumstances for tailored debt advice.

• I receive a student loan – does this count as income?

While the loan that you receive for your tuition fees doesn’t count as income, your student maintenance loans and grants do.

• I’m due to return to work from maternity leave – should I apply for my DRO Debt Relief Order now?

While the income you receive will almost certainly increase, so too will your costs (e.g. in the form of child care, commuting, lunch and so on). This may mean that you’d still fit within the DRO debt eligibility criteria, however, you should seek specialist debt advice for a more concrete answer.

• I receive money from partners/family/friends – how does this affect a DRO Debt Relief Order?

It doesn’t. These can be categorised as gifts, which aren’t reliable income. As such you do not need to declare them on your DRO application.

• I drive a car that belongs to someone else – what will happen to this car?

Unless the car belongs to you, it won’t impact your DRO Debt Relief Order. However you should ensure that your DRO Advisor is aware of the situation, and you should also be able to present proof that the car belongs to someone else.

• How long will I wait for approval of my DRO Debt Relief Order?

DRO Debt Relief Orders are known to involve a relatively quick turnaround time – this is usually within a matter of days after you’ve emailed your application.

• What are the chances of the DRO application being rejected?

Minimal. In fact, fewer than 1% of DRO applications are rejected. So don’t worry if you feel your advisor is being difficult, they’re probably just ensuring that they have all that they need for approval.

• Will my DRO Debt Relief Order affect my partner’s credit record?

Only if you hold a joint account with one another.

• What information will I need about my debts?

Your DRO Debt Relief Order application will require:

• A list of current creditors
• The amount owed in each case
• The reference/account number for each

• Will my DRO Debt Relief Order write off debts?

Yes, following 12 months the following debts will be repaid:

• Arrears on household bills such as rent, gas, electric, telephone and council tax
• Consumer debts (e.g. credit card debt, payday loans, and overdrafts)
• Benefit overpayments, unless they were due to fraud
• Hire Purchase (HP) or conditional sale agreements
• Items bought on finance
• Loans from friends or family

• Do I need a new bank account?

If your bank account has an overdraft, then it will need to be included in the DRO Debt Relief Order, and you will need a new bank account. But don’t worry – basic bank accounts are widely available on the high street or online.

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• How much does it cost to set up a DRO Debt Relief Order?

The set-up fee is £90 – this is a one-time fee and is paid to the Official Receiver.

• I used my credit card recently – will this affect the chances of my DRO Debt Relief Order being approved?

This is an all too common situation. In short, whether or not it affects your DRO application will rely on why you used the card. If you went on a shopping spree, and the DRO Unit believes this to be reckless financial behaviour, they may well impose more stringent restrictions on you as part of the Debt Relief Order.