Debt Relief Order (DRO)

Why choose a Debt Relief Order?

Debt Relief Orders (DRO’s) are available if you have little in the way of assets or disposable income.

  • In order to apply for a DRO the following specific conditions apply:
    • You have debts of no more than £20,000
    • You have assets of less than £1,000
    • Your disposable income is less than £50 per month
    • You have not applied for a DRO within the past 6 years
    • You will have lived or worked in England and Wales within the last 3 years
  • A DRO is often described as ‘bankruptcy lite’.
  • The costs of application are lower than bankruptcy
  • The restrictions are similar to those of a bankruptcy

In short, a DRO is an effective remedy if the alternatives are not feasible and you satisfy the conditions.

Overview

  • A DRO enables you to be free from the pressure of your creditors, provided you satisfy the conditions for application. (See Why Choose a DRO).
  • Unlike a bankruptcy, in a DRO you do not have a specific trustee who administers your affairs
  • The system relies on you to provide accurate information about your debts and assets and that you satisfy the criteria
  • Once in a DRO, certain restrictions apply. These are similar to bankruptcy in that you cannot:
    • Borrow more than £500 without telling the lender about your DRO
    • Act as a director of a company
    • Create, manage or promote a company without permission of the Court
    • Manage a business without telling those you do business with about your DRO

These restrictions usually last for 12 months. They can be extended if you have acted dishonestly in
obtaining your DRO.

Procedure

As with bankruptcy you apply for a DRO online.

You must apply through an authorised debt advisor, who will help you fill in the application. A list of authorised debt advisors can be found here.

The cost of applying for a DRO is currently £90

You must tell the debt advisor about your assets and your creditors. You must also tell them if in the previous 2 years you have:

  • Paid some creditors but not others
  • Given away assets or sold them at less than their true value

When the DRO is granted the Official Receiver will confirm this to you and explain the restrictions of a DRO. He will also write to your creditors telling them of the DRO so that they will no longer pursue you for their debts.

Credit Record

  • The existence of your DRO will stay on your credit record for 6 years.
  • After 6 years it should be removed automatically. However, this does not always happen.
  • You can write to the major credit reference agencies after 6 years and ask them to remove the DRO from your records

Bank Account

  • As with bankruptcy, if you are considering applying for a DRO it may be advisable to have a bank account which remains in credit already opened before you make the application.
  • Any bank account which is overdrawn when the DRO is made will be frozen when the Official
    Receiver writes to your creditors

Who will know?

  • DRO’s are entered onto the Individual Insolvency Register which is an official Government
    website