Debt relief orders - what you need to know
A debt relief order (DRO) is one way to deal with your debts if you:
- owe £20,000 or less
- don’t own your own home
- don’t have other assets or things of value
- don’t have much spare income
You don't have to make payments towards most types of debt included in your DRO and your creditors can’t force you to pay off the debts. A DRO usually lasts a year unless your situation improves. When the DRO ends, most of your debts will be written off.
You’ll need to speak to a special DRO adviser who will help you fill in an application to the official receiver. The adviser can’t charge you for their time but there's a £90 fee to make a DRO application.
Check if you can get a DRO
You should be able to get a DRO if all of the following apply:
- you're unable to pay your debts
- your qualifying debts are not more than £20,000
- you’ve got no more than £50 left over each month after you’ve paid your usual household expenses
- you don’t own your home
- other savings or things of value you own, called assets, are worth no more than £1,000 (some assets are ignored when working out the value, for example, basic household items and tools you need to do your job)
- you don’t own a car worth £1,000 or more, unless it’s one that’s been specially adapted because you have a disability
- it's been at least 6 years since your last DRO was made and you aren’t going through another formal insolvency procedure, such as bankruptcy or an individual voluntary arrangement (IVA)
- you've lived, had a property, or worked in England or Wales in the last three years.
Find out more information about how income, debts and belongings are assessed for a debt relief order.
You must tell your DRO adviser if in the last 2 years you’ve:
- given away assets
- sold assets for less than their value, for example if you sold a car worth £2,000 to a friend for £200
- prioritised paying back one creditor over others, for example if you paid off a debt you owed to a relative and didn't pay your other creditors
Your DRO application might be refused if any of these apply to you. They'll look at the facts of your case before making a final decision.
Debts covered by a DRO
Debts that can go into a DRO are called ’qualifying debts'. During the DRO period creditors can’t ask you for payments - if they do, you don't have to pay them. They include:
- credit cards, overdrafts and loans
- arrears with rent, utility bills, telephone bills, council tax and income tax
- benefits overpayments
- hire purchase or conditional sale agreements
- buy now - pay later agreements
- bills for services like vets or solicitors
- debts you owe to friends and family
- business debts
If you obtained any of these by fraud, you will still have to pay them when the DRO has ended.
If you're behind on your rent, your landlord can still take action to evict you, even if the rent arrears are included in your DRO. This means you may have to continue paying these after a DRO is made.
Debts not covered by a DRO
Not all debts are covered by a DRO. You'll still need to pay:
- magistrates court fines and confiscation orders relating to criminal activity
- child support and maintenance
- student loans
- social fund loans
- compensation for death and injury
If you have any of these debts they don't count towards the £20,000 limit.
If you’re unsure whether a debt would be covered by a DRO, check with your DRO adviser. If they aren’t you’ll still need to pay them if you get a DRO.
If you forget to include any debts in your DRO you can’t add them after. If any missed debts would have taken you over the £20,000 limit then your DRO might be cancelled. It’s important that you tell the DRO adviser about all of your debts.
Check if a DRO is right for you
A DRO can provide a way out of debt. However, it's important to know the impact a DRO will have on all areas of your life before you apply. For example:
- if any of your debts are for goods bought on hire purchase, you might need to give the goods back
- your DRO will stay on your credit record for six years - this might make it difficult for you to get credit or find a new home in the future
- if you have a tenancy agreement it could be affected, your DRO adviser can check this
your bank might close your account and you’ll need to open a new one
if you hold a power of attorney over someone else's financial affairs or someone else has one for you, this will end
it might affect applications you make for British citizenship - if you are unsure then you should get advice from an immigration specialist
You’ll also have to follow certain rules, called 'restrictions', during the DRO period. This means:
- you can't borrow £500 or more without telling the creditor about the DRO
- you can’t get involved in promoting, managing or setting up a limited company, or be a company director, without getting permission from the court
- if you have a business under a different name from the one under which you got the DRO, you’ll have to tell everyone you do business with the name you used when you got the DRO
- while the DRO is in force, and for three months afterwards, your details will appear on the Insolvency Service’s Individual Insolvency Register, which can be viewed by anyone
If having your address on the register could lead to violence against you or a member of your family, you can ask the court to order that your address doesn't appear on the register. You’ll need to apply for a court order before you make your DRO application - your DRO adviser can help you with this.
If you’re not sure a DRO is the best option, you can find out what other help you can get with debts.
How to get a DRO
If you think a DRO is right for you, find more information about how to get a debt relief order - including how to find a DRO adviser and pay the fee.