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Debt Relief Order
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Debt Relief Order
A Debt Relief Order (DRO) is a method of debt relief for those that have a relatively small amount of debt and very few assets.
A DRO is set up through a DRO advisor and the Insolvency Service. It allows all payments, interest, and charges to be frozen for 12 months. Once this process has started, your creditors are no longer allowed to pursue you for payment.
After the 12 months is up, if you are still in a position that means you cannot pay your debts, they will be written off. Don’t forget, your DRO will remain on your credit file for six years.
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What is the Criteria for a Debt Relief Order?
- You are unable to pay the debts you owe.
- You have £75 or less spare income each month (after normal household expenses).
- You must owe less than £50,000.
- You must not be a homeowner.
- You have less than £2,000 worth of assets (this excludes a car which you also own, if its value is less than £4,000).
- You have not had a DRO in the past six years and are not in another formal insolvency procedure.
- You have lived or worked in England, Wales or Northen Ireland within the past three years.
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Benefits
- Its free to apply for a Debt Relief Order
- A DRO lasts for 12 months, so it can be a quicker way of becoming debt free.
- You are not required to make any payments towards your debt during that time.
- Interest and charges are frozen.
- You will keep any assets, including your car as long as it is valued at less than £4,000.
Considerations
- There is eligibility criteria which dependent on your circumstances you may not meet.
- As a formal arrangement, a DRO must be applied for through an authorised representative.
- You cannot enter a DRO if you have an existing IVA or bankruptcy order.
- You cannot apply within six years of a previously accepted application.
- If your financial circumstances change within the 12 months, the DRO can be revoked.
- Your details will be added to the Individual Insolvency Register, and the DRO will stay on your credit file for six years.
If you’re struggling with your debts, you should seek debt advice from an FCA approved organisation before proceeding with a debt solution.
