(DRO)

What is a DRO?

A Debt Relief Order (DRO) is an alternative to bankruptcy which lasts for 12 months. In order to qualify for a DRO you must not own a home, have assets of less than £1,000 (excluding a vehicle), eligible debts of under £20,000 and a monthly disposable income of less than £50.

For 12 months, while the DRO is active, you will not be required to contribute towards the debts which are included in the DRO. Any remaining debts will be written off after 12 months, providing you still qualify.

How does a DRO work?

You will need to apply for a DRO through an Insolvency Service accredited intermediary. A full review of your financial circumstances will be carried out to see if you are eligible. An application is then made to the Official Receiver.

Once the DRO has been granted the Official Receiver will notify your eligible creditors. Interest and charges relating to debts included in the DRO will be frozen for a period of 12 months. If you experience a change in circumstances during this period (e.g. a pay rise, inheritance, lottery win etc) you must inform the Official Receiver. They will then decide if the DRO should continue.

If you no longer qualify for a DRO it will be revoked. While the DRO is active you must service essential bills (council tax, mortgage/rent, utilities) and any debts which cannot be included in a DRO.

How do I qualify for a DRO?

The total owed to unsecured creditors must be less than £20,000 (revised limits as of October 2015). You must not own assets with a total value of more than £1,000 or a vehicle worth more than £1,000 (though if special adaptations have been made e.g. for mobility or disability purposes then this may be allowed).

Your disposable income must be less than £50 per month after paying your essential household bills. You may only apply for a DRO once in any six year period. If you are currently party to bankruptcy proceedings or an existing IVA you will not qualify for a DRO.

Debts that are excluded from a DRO include, but are not limited to, child maintenance arrears, Magistrate court fines, criminal fines (this includes debts obtained under the Proceeds of Crime Act), debts from fraudulent activity, damage or personal injury claims made against you, student loans and social fund loans.

You must have been a resident, property or business owner in England, Northern Ireland or Wales in the past three years.

Is a DRO right for me?

Entering into a DRO may have consequences. These include:

• A detrimental effect on your credit score for up to six years following registration of the DRO.
• During the DRO you will still need to pay any essential bills such as council tax, mortgage/rent and utilities that aren’t included.
• You are obliged to notify potential lenders you have a DRO when applying for credit above £500. Any future credit you apply for may be at a less competitive rate.
• If you have a DRO there maybe restrictions on managing a company.
• The DRO can be revoked if you don’t meet your obligations during it or your circumstances improve.
• If your debt level increases above £20,000 the DRO may be revoked.
• Details of a DRO are publicly available on the Register of Insolvencies.
• DROs are not available in Scotland.