What is a Debt Relief Order (DRO)?

A DRO is classed as a formal insolvency procedure aimed at low income individuals, who have no assets, cannot pay their debts and are unlikely to get out of debt as there is little possibility that their financial situation will improve.  So mostly for people who are on benefits, who are likely to remain so for their foreseeable future.  They are run by The Insolvency Service through approved debt advisors called Approved Intermediaries.  The intermediary will give the debt advice and assist with the online application form, although it is not always necessary to only get advice from an Approved intermediary.

Before even considering if a DRO is suitable or not, be aware that the criteria are quite rigid.

Who can apply for a DRO?

You must fulfil the following conditions to be considered:-

  1. You must be domiciled in the UK (England and Wales) in the previous 3 (three) years.
  2. You do not own your property, either outright or with a mortgage.
  3. You must be insolvent e.g. unable to pay your debts as and when they fall due.
  4. Your total debts must not exceed £20,000.
  5. Your total assets must not exceed £1,000 – this does not include most general household chattels (seek advice if you are still unsure), but it does include your car.
  6. Your surplus income, less your normal living expenses, must not be more than £50 per month.
  7. You cannot apply for a DRO if you have already been in one in the past 6 (six) years.
  8. You may not apply for a DRO if you are already in one or more formal insolvency procedures at the time of your application e.g. DRO or a DRU, a Bankruptcy, an IVA, under a BRU/BRO (Bankruptcy Restriction Undertaking/Order) etc.

How much does a DRO cost?

They currently cost £90, and this fee must be paid within 6 (six) months of the first instalment if the individual is unable to pay the amount in full.  Once all the conditions have been met and upon receipt of the £90, the Official Receiver will consider your application.

What are the Advantages of a DRO?

  •  It lasts for a period of 12 (twelve) months.
  •  After 12 months, all the debts listed in the DRO are discharged in full and the creditor cannot pursue you again for the debt – it is called a Moratorium.  So you must ensure that ALL debts are listed in your DRO.

What are the Disadvantages of a DRO?

  •  Some debts survive all formal insolvency procedures and a DRO is no different i.e. Fines or tax bills.
  •  A person under a DRO has the same restrictions as those imposed on them as someone who is bankrupt, so it is always best to seek the best advice before entering into any formal insolvency procedure.

Where do I have to go to get a DRO?

Only approved intermediaries can administer a DRO and so if you are suitable for one, i.e. you meet the above criteria, get in touch with your local Citizen Advice in the first instance.

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