A debt relief order, or DRO can be a low-cost alternative to bankruptcy. It’s a way to have your debts written off if you can’t realistically afford to pay them back.
DROs are only available in England, Wales, and Northern Ireland, and you’ll need to apply for one through an approved organisation such as here, at StepChange.
A DRO freezes your debt repayments for 12 months, this is called the moratorium period. If your financial situation hasn't changed by the end of this period, then your debts will automatically be written off.
As soon as your DRO is approved, the creditors included can't take any action to collect the debt from you and they should also stop asking you for payments.
If you live in England or Wales, you must not own any assets worth over £2000, such as a car or your home. Your total debts need to be less than £30,000, and you must have less than £75 left over each month after paying your essential living costs such as your household bills, food shopping and utility bills.
For people living in Northern Ireland the figures are different, with total assets being less than £1000, total debts of less than £20,000 and less than £50 left each month after essential living costs.
To qualify for a DRO you must live in England, Wales or Northern Ireland, or have run a business in one of these countries in the last three years.
You must be unable to pay off your debts, and you’ll need to meet certain criteria about how much you owe, what assets you own, and how much you can afford to repay.
The criteria for a DRO also changes depending on where you live in the UK. So to find out more, we’d recommended visiting our website.
So a DRO hopefully sounds like a good option. However, there are several risks you’ll need to consider first.
You’ll need to pay a one-off setup fee to the insolvency service of £90.
And if something changes during your 12-month moratorium period, such as a significant pay rise or an inheritance, your DRO could be revoked, meaning it will be cancelled.
Having a DRO will also affect your credit rating for six years from the date it’s approved which means that you're likely to find it harder to get credit during this time.
Some debts can't be included in a DRO. This includes court fines, student loans or child maintenance payments, and you must follow some restrictions for the 12-month period.
Additionally, your name will be added to a DRO register. This can be read online if someone looks for it, but it’s unlikely someone would stumble across it, and it shouldn’t appear in online search results for your name.
Although a DRO is a legally binding solution, you won't need to appear in court, but you must make sure all the information in your application is correct and not miss any information out.
And finally, it's really important to get expert debt advice to make sure that a DRO is suitable for you.
We offer free debt advice both online, and over the phone. We'll help you put together a realistic budget and a recommend the most suitable debt solution for you.
If an DRO is a solution that’s appropriate for your circumstances, we'll help you set it up and be here to support you every step of the way.