Debt Relief Orders

Debt Relief Orders

Debt Relief Orders (DRO’s) are an alternative to bankruptcy for debtors who have relatively low liabilities, little surplus income and few assets. Creditors who are included in the DRO are prevented from taking any action to recover or enforce their debts against the debtor. Generally those debts will be discharged at the end of one year.

To apply for a DRO, you must meet certain conditions:

• You must be unable to pay your debts.
• You must owe less than £20,000.
• You can own a car to the value of £1000 but the total value of other assets must not exceed £1000.
• After taking away tax, national insurance contributions and normal household expenses, your disposable income must be no more than £50 a month.
• You must be domiciled (living) in England, Wales or Northern Ireland, or at some time in the last 3 years have been living or carrying on business in England, Wales or Northern Ireland.
• You must not have been subject to another DRO within the last 6 years.
• You must not be involved in another formal insolvency procedure at the time you apply.

Advantages

• Once the 12 month period of the DRO has ended, the debts listed in the DRO will be discharged and you will be freed from those debts.

• Cheaper than bankruptcy. The fee is currently £90. Once this is paid, no further payments are required.

• Creditors cannot continue or start legal action against you for repayment of the debts that are included in your DRO.

• DRO’s are not advertised in your local paper or in the London Gazette. However, they will be held on a public register maintained by the Insolvency Service.

Disadvantages

• You must not obtain credit of £500 or more, either alone or jointly with another person, without telling the lender that you are subject to a DRO.

• You may not carry on a business (directly or indirectly) in a name that is different from the name under which you were granted a DRO, without telling all those with whom you do business the name under which you were granted a DRO.

• You may not be involved (directly or indirectly) with the promotion, formation or management of a limited company, and may not act as a company director, without the court’s permission.

• You cannot apply for a DRO if you have been subject to a previous DRO within the last 6 years.

• Not all debts can be included in a DRO. Student loans, child support and maintenance and court fines and confiscation orders cannot be included.

• Details of the DRO will also be added to your credit file and will remain on there for six years from the commencement of the arrangement. This will impair your ability to obtain credit in the future and may make getting bank accounts more difficult.

DRO’s are aimed at people with no assets and a low income with no other access to debt relief and no prospect of the situation improving. If people do have assets or there is a possibility of an improvement in financial circumstances, a DRO is not an appropriate solution and other debt remedies are available.

The official receiver will be able to apply for a debt relief restrictions order, similar to the bankruptcy restrictions order, which will extend the period of restriction for up to 15 years if they find you have been dishonest before or during your DRO or that you are otherwise to blame for your position.

You can only apply for a debt relief order online through an approved intermediary. An intermediary is usually a skilled debt adviser who has been given permission by a competent authority to complete the forms and give advice on debt relief orders. If this is the right option for you, we will refer you to an approved intermediary, such as StepChange debt charity. They can be found at  https://www.stepchange.org or by calling 0800 138 1111.

Alternatively, visit www.gov.co.uk/options-for-paying-off-your-debts/debt-relief-orders

Need more information? Call 08000 114 999 to Click Here to contact one of our friendly advisors for a confidential chat.