Dealing With Debts, Options Explained

e) Debt Relief Order (DRO)

A Debt Relief Order (DRO) is a formal debt solution and may be suitable for those with relatively low liabilities, little surplus income, few assets and are currently unable to access other forms of debt relief.

To qualify for a Debt Relief Order (DRO) a debtor must:

be unable to pay their debts
have total unsecured liabilities of no more than £15000
not have more than £300 in assets (this includes houses & pension FUNDS)
have disposable income of less than £50 per month
not own a vehicle (car / motorbike) that exceeds £1000 in value
be domiciled in England or Wales, or in the last 3 years have been a resident or carrying on in business in England or Wales
not have been subject to a Debt Relief Order (DRO) within the last 6 Years
not be involved in another formal insolvency debt procedure such as undischarged bankrupt, subject to a current BRU / BRO, current Individual Voluntary Arrangement (IVA)

Debt Relief Orders (DROs) are applied for with the help of an Approved Intermediary and will last for 1 year after which the debtor will be released from their debts (with some exceptions)

Some pros

debts written off at the end of the Debt Relief Order (with possible certain exceptions)
none of the creditors listed in the DRO can take further action without the courts permission
allows the debtor to make a genuine fresh start after 1 year
affordable fee (£90) and can be paid in instalments
allowed to keep a vehicle (car / motorbike) up to the value of £1000

Some cons

details of DROs are entered on the Insolvency Service Public Register
the DRO could be revoked (withdrawn) if the debtor does not co-operate with Official Receiver during the time the DRO is in force
the debtors employment may be affected
damaged credit rating / committing an offence if the debtor obtains credit of £500 or more without disclosing that they are subject to an IVA
a debtor may have a restriction order (2 to 15 years) made against them if they are deemed to have acted irresponsibly, recklessly or dishonestly
the debtor cannot act as a director of a company or be involved in its management unless the court agrees
certain debts cannot be include - for example - student loans, fines, child maintenance, criminal injuries
if your financial circumstances improve during the period of the DRO (eg. if you find employment) your DRO may face being revoked

Useful Links

Insolvency Service
0845 802 9846
DRO Advice and Support Forum - Money Saving Expert

Next: Individual Voluntary Arrangement (IVA)