Debt relief orders - what you need to know
A debt relief order (DRO) is one way to deal with your debts if you don’t own your own home, don’t have much spare income, and your debts are £20,000 or less. Some types of debt don’t count towards this limit, so check whether you're eligible before you decide.
If you're unsure about whether a DRO is right for you, including whether you're eligible, speak to a DRO adviser. You can find a DRO adviser at most Citizens Advice Bureaux.
DROs – key facts
While a DRO is in force:
- you don't have to make payments towards most types of debt included in your DRO
- your creditors can’t force you to pay off the debts.
At the end of the DRO period, usually around a year:
- your debts will be written off
- you’re still responsible for paying off any that aren’t included in the DRO - this is because DROs don't cover all debts.
To apply for a DRO:
- there's a fee of £90. If you can't afford to pay the fee you may be able to get help towards the cost from some charities
- you have to go to a DRO adviser, also called an approved intermediary - you can't submit your own application. You can find a DRO adviser at most local Citizens Advice Bureaux.
There are some charities and trusts that may be able to help with paying the DRO fee. You can find out about help available in your area and how to apply using the grants search tool on the Turn2us website.
Who is eligible for a DRO
You may be able to get a DRO if all of the following things apply to you:
- you're unable to pay your debts
- your debts are worth up to £20,000
- you’ve got £50 or less 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 less than £1,000 (some assets are ignored when working out the value)
- you don’t own a car worth £1000 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 previous 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.
If you've done any of the following in the two years before your application, you must declare it:
- given away belongings
- sold belongings 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 may be refused if any of these apply to you, although the official receiver could still make a DRO. They will look at the facts of your case before making a final decision.
Debts a DRO covers
Debts that can go into a DRO are called qualifying debts. 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
- 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 get their property back, 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 that can’t go in a DRO are:
- magistrates court fines and confiscation orders - these are fines relating to criminal activity
- child support and maintenance
- student loans
- social fund loans
- compensation for death and injury.
These debts don't count towards the limit.
If you’re unsure whether a debt would be covered by a DRO, check with your DRO adviser.
Is a DRO right for you?
A DRO can provide a way out of debt. However, getting a DRO will have an impact on your lifestyle and credit rating. This means:
- if any of your debts are for goods bought on hire purchase, you may need to give the goods back
- your DRO will stay on your credit record for six years. This may make it difficult for you to get credit or find a new home in the future.
You’ll also have to follow certain rules, called restrictions, during the DRO year. 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 name on the register could lead to violence against you or a member of your family, you can ask the court to order that your name doesn't appear on the register.
It's important to make sure you understand the impact a DRO will have on all areas of your life before you apply.
How to get a DRO
If you think you may be eligible and that a DRO is right for you, follow this process to apply:
- find a DRO adviser. If they confirm that you are eligible, work with them to make your application
- pay the fee
- wait for the Official Receiver to tell you whether your application's been successful.