What is a Debt Relief Order?
A Debt Relief Order (DRO) is a solution to help people deal with personal debts they cannot pay. A DRO is a way to cancel or ‘write off’ your debts. Once the debt is written off, you will not have to deal with the people you owe money to (creditors).
To apply for a DRO, you need to apply through an approved debt adviser and be able to meet certain eligibility criteria.
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Table Of Contents
How long does a Debt Relief Order last?
A DRO normally lasts 12 months. If approved, you stop making payments towards the debts (and interest) listed in the DRO during that time. After the 12 months, you will not have to pay these debts anymore.
How long does a DRO stay on your credit file?
A DRO stays on your credit reference file for 6 years from the date it was approved, which is the same for other debt relief options.
Where is a Debt Relief Order Available?
Debt Relief Orders are available in England and Wales. You cannot apply for a DRO if you live in Scotland or Northern Ireland.
What is the eligibility criteria for a Debt Relief Order?
Currently, you are eligible for a DRO if you:
- owe less than £30,000 in total (this changes to £50,000 on 28th June 2024)
- have savings or valuable items worth less than £2,000 in total
- own a vehicle worth less than £2,000 (if you were to sell it today) (this changes to £4,000 on 28th June 2024)
- do not have enough money left at the end of the month to make your debt repayments
- have lived or worked in England and Wales in the last 3 years
- are not currently bankrupt, have an interim order or an individual voluntary arrangement
- have not had a DRO in the last 6 years
What Debts can be included in a Debt Relief Order?
Debts that can be included in a DRO are called ‘qualifying debts’.
They include:
- credit cards, overdrafts and loans
- rent arrears and utilities (gas, electricity, telephone)
- council and income tax
- buy now - pay later agreements
- benefit overpayments
- debts to friends and family
Once your DRO is approved, you will no longer have to pay the debts (and interest) listed in the DRO anymore.
What debts cannot be included?
There are some types of debts that cannot be included in a DRO. You’ll still have to pay:
- child maintenance or anything you owe under family proceedings
- student loans
- budgeting and crisis loans from the Social Fund
- debts secured against any possessions you own
- damages for personal injury or death a court has ordered you to pay
- unpaid TV licence fees
Is there a cost to apply for a Debt Relief Order?
From 6th April 2024, you do not need to pay for a DRO – there is no application fee.
How does a DRO affect my credit file?
If your application is successful, the DRO will also be added to your credit reference file. It will usually show on your credit reference file for 6 years.
What happens during the 12-month period?
Once you receive your DRO, you stop making payments towards the debts listed in it.
A DRO lasts 12 months. This is called the DRO period. In some cases the DRO period can be extended.
At the end of the period, your DRO is closed, and you will not have to pay your debts back.
You do have to keep paying any regular commitments during the DRO period, like rent and bills.
What happens after the 12-month period?
At the end of your DRO period, the restrictions end, and you will not have to pay the debts (and interest) listed in the DRO.
You can check the date your DRO ends using the Individual Insolvency Register.
What if a creditor asks me for payment?
Creditors listed in your DRO cannot ask you to make payments during the DRO period. They can send you statements and general correspondence, as well as any communications that are required under regulatory rules.
If a creditor asks you for payment, tell them about your DRO and speak with your debt adviser.
Are there any restrictions to a DRO?
Once you are granted a DRO, you will have to follow certain restrictions during the DRO period.
If you apply for an overdraft or a new account, you must tell the bank or building society about your DRO.
You cannot:
- borrow more than £500 without telling the lender about your DRO – whether you’re borrowing on your own or with someone else
- write cheques when you do not have sufficient funds
- apply for another DRO for 6 years from the date your DRO is approved
You will not be able to:
- act as a director of a company
- create, manage or promote a company without the court’s permission
- manage a business with a different name without telling anyone you do business with about your DRO
You must not break any of the DRO restrictions and may be prosecuted if you do so.
If you break them, the restrictions can be extended for 2 to 15 years. This extension is called a Debt Relief Restrictions Order (DRRO).
Your creditors can ask the Insolvency Service to investigate and get debt relief restrictions order (DRRO) against you if they believe:
- you made your debt situation worse before you applied for your DRO
- you have acted dishonestly
Speak to a debt adviser or contact the Insolvency Service if you’re unsure about any of the restrictions.
Organisations who can help you apply for a Debt Relief Order
There are a number of organisations who are able to help you to apply for a Debt Relief order. We’ve listed some of them below.