What Is a Debt Relief Order (DRO)?
A Debt Relief Order – or DRO – is an alternative to traditional bankruptcy, often referred to as “bankruptcy lite”.
Available for those with low personal income and little assets, DROs can allow those struggling with unaffordable debt a way to take back control of their finances:
- Covers up to £50,000 of debt
- All debts are written off after 12 months
To qualify, you must have insufficient disposable income every month to make your debt repayments, and no more than £2,000 worth of savings or valuable items. Those with higher income or assets should consider an alternative personal insolvency solution.
Please note: Moore Recovery does not currently assist with Debt Relief Orders. For further information, please visit the following website: How to get a Debt Relief Order (DRO) – GOV.UK
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Can I Qualify for a Debt Relief Order?
Some debtors didn’t have the money to apply for bankruptcy or enter into an IVA, so Debt Relief Orders were introduced to make insolvency solutions more accessible to anyone who might need them.
To qualify for a DRO, you must:
- Not own your own home
- Have less than £75 in disposable income per month
- Have less than £2,000 in assets (savings, etc.)
- Have less than £50,000 in total debts
DROs were tailor-made for those with low income and practically no assets. This means they’re not widely available to everybody.
If you’re not eligible for a DRO, don’t worry—there are plenty of other personal insolvency solutions available to you.
What Are the Advantages of a Debt Relief Order?
As a kind of “specialist” insolvency procedure, Debt Relief Orders offer a lot of advantages to those who can qualify:
- Cheaper than other insolvency procedures
- You’ll be able to keep your household items
- May be able to keep your vehicle
- Interests and charges on your debts are frozen
- Debt collection efforts are stopped
- Your debts are written off after 12 months
DROs operate much like bankruptcy. The main distinction is the cost; you need to pay £680 to apply for bankruptcy, whereas applying for a DRO is completely free.
What Is the Debt Relief Order Process?
A Debt Relief Order operates just like traditional bankruptcy; you spend 12 months following the restrictions of the order–after this time, all of your debts are written off.
You may have to surrender some assets, but this is unlikely (only those without many expensive assets can qualify for a DRO).
You can learn more about the DRO process by exploring the tabs below.
To enter into a Debt Relief Order, you must go through a specialist DRO adviser, known as an “approved intermediary”.
You’ll have to send proof of your income, spending, assets, and debts.
We don’t have any DRO advisers working with us at Moore Recovery, but there are plenty available through charities such as StepChange or Citizens’ Advice.
You’ll need to work with your DRO adviser to complete the application form, and submitting the application is free.
Your application is sent to the Official Receiver, a public servant working on behalf of the Insolvency Service. They’ll make an objective decision based on the information presented.
They can either:
- Accept the application
- Defer it while they obtain further information
- Refuse the application
You’re liable to be rejected if you don’t meet the qualification criteria or if you have given false information on your application. If rejected, you won’t be refunded the £90 application fee.
The DRO adviser will notify you that your application has been accepted. This will come in the form of a letter, which will specify the terms of the order and outline all of your responsibilities. All of your debts and interest will be frozen as you enter a ‘moratorium period’.
After 12 months, your moratorium period comes to an end. All of your outstanding debts are written off, and the restrictions brought on by the DRO will be lifted.
What Debts Can Be Included in a DRO?
As is the case in bankruptcies and IVAs, Debt Relief Orders can cover a wide umbrella of debts. This means it’s easier to highlight which debts you can’t include in a DRO:
- Child support payment
- Student loans
- Magistrate court fines
- Compensation claims for death or injury
Essentially, all debts can be included apart from court costs.
These ineligible debts won’t be counted toward the £50,000 debt limit; if they push the total sum of your debt over £50,000, you could still be eligible for a DRO.
It’s important to note that rent arrears can be included in a DRO, but your landlord will still be able to evict you.
What Are the Restrictions of a Debt Relief Order?
A Debt Relief Order might be less pricey than bankruptcy, but the restrictions remain largely the same.
- You cannot borrow more than £500 without telling the lender you’re in a DRO
- You can’t be a company director
- You’re unable to be involved in the creation, management or promotion of a company
You have to follow the restrictions of a DRO for 12 months. If you violate the restrictions during this time, you could be served with a Debt Relief Restrictions Order (DRRO). This extends the period you have to obey restrictions by 2-15 years.
What Are the Alternatives to a Debt Relief Order?
If you can’t qualify for a DRO – but you’re struggling with unaffordable debt – there are many other insolvency procedures to consider.
All of these solutions can help you take back control of your finances. Which one is right for you depends on your individual situation. Remember, it’s always best to seek advice before rushing into anything.
Bankruptcy is essentially a more comprehensive version of a Debt Relief Order. The process is designed to deal with more complex debts and assets. You can apply to make yourself bankrupt for £680.
You’ll have to surrender your valuable assets—like your home and vehicle—but after 12 months, you’ll be completely debt-free.
An Individual Voluntary Arrangement acts as another alternative to traditional bankruptcy.
The procedure allows you to deal with your debts without surrendering your assets.
You make one monthly payment over a period of 5-6 years; any remaining debts can then be written off.
If you’re dealing with lower debt levels and feel that a formal insolvency solution may be too drastic, you could opt for a Debt Management Plan instead.
This is an unofficial repayment agreement with your creditors. Be careful, though—DMPs are not legally binding, meaning you’re not strictly protected.
Speak to an Expert
If you’re struggling with personal debt, you need to seek the advice of an insolvency practitioner.
Ignoring the issue allows debts to spiral, worsening the situation and limiting your options going forward.
Our expert team can assess your financial situation and guide you to the solution that is best suited to you, whether that be a Debt Relief Order, an Individual Voluntary Arrangement, or bankruptcy.
Get in touch today to book a free consultation.
FAQs
Can I Qualify for a Debt Relief Order?
Debt Relief Orders are available to those with limited disposable income and assets.
- You must not have over £75 in disposable income per month
- You must not have more than £50,000 worth of debt
- You must not have total assets worth more than £2,000
Can I Keep My Vehicle in a Debt Relief Order?
Yes – you can keep your vehicle if you need it for work, childcare, or general mobility.
However, if you own a luxury vehicle, you’ll likely need to exchange it for a modest one.
What Is the Difference Between a Debt Relief Order and Bankruptcy?
A Debt Relief Order has the same restrictions as bankruptcy. It also writes off your debts in 12 months, just like bankruptcy.
The difference lies in the cost. A Debt Relief Order has a much lower application fee, making it accessible for people who can’t afford to apply for bankruptcy.
What if I Can't Qualify for a Debt Relief Order?
Don’t worry – there are plenty of other personal solutions available to you.
DROs are a bit of a niche procedure, so many people struggling with debt have to consider other options.
How Will a Debt Relief Order Affect My Credit Score?
A DRO will have the same impact on your credit score as declaring bankruptcy. It will be visible on your credit record for 6 years and during this time you will find it difficult to take out any loans.
Who Will Know About My Debt Relief Order?
You will be publicly listed on the Individual Insolvency Register during the year that your DRO is active and for 3 months after it is finished. While this is available for anyone to view, the register is unlikely to be used by anyone aside from creditors and financial organisations. The register listing will also not appear in search engine results.
If you’re worried that being listed on the register may be a safety risk for you or your family, you can ask the court not to list your address. You’ll need to apply for a court order before you make your DRO application. If you need help with this, speak to your DRO adviser.
Please note: Moore Recovery does not currently assist with Debt Relief Orders. For further information, please visit the following website: How to get a Debt Relief Order (DRO) – GOV.UK
