Debt Relief Orders

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What is a Debt Relief Order?


A Debt Relief Order enables people to tackle debt they cannot afford to repay. It’s a formal personal insolvency process and a cheaper alternative to bankruptcy. Once A DRO has been approved, your creditors cannot take action to recover money from you.


You’ll get discharged from your debts after just one year. This option is used by people with little spare income, few assets, and a total debt of less than £30,000. A Debt Relief Order is not available to residents of Scotland.


The qualification criteria to enter a Debt Relief Order is changing on 29th June 2021. This page is based upon the new criteria which are about to come into effect.


If you’d like advice about your debts, please contact us. Our expert debt advisers will help you to address your debts and get relief from your creditors.


Qualification Criteria


To qualify to use a Debt Relief Order from 29th June 2021 you must meet the following criteria:


• Live in England or Wales

• Owe £30,000 or less

• Can pay the £90 application fee

• Surplus income of £75 per month or less

• Not a homeowner

• Any vehicle you own is worth less than £2,000

• Your other assets are worth less than £2,000 in total


Essential household items, and tools necessary for your work, do no count towards the £2,000 “other assets” limit.


Northern Ireland Qualification Criteria


The above criteria also applies if you live in Northern Ireland, but with the following amendments:


• Owe £20,000 or less

• Surplus income of £50 per month or less

• Any vehicle you own is worth less than £1,000

• Your other assets are worth less than £1,000 in total


Advantages and Benefits


This is a low-cost and comparatively fast debt solution. The application fee of £90 compares very favourably to bankruptcy in England and Wales (£680 fee). No further monthly payment is required. Unless your financial situation improves, your debts will get written-off after one year.


You’ll be protected from your qualifying creditors. They cannot chase you for payment while you’re subject to an approved Debt Relief Order and they cannot use legal debt recovery procedures. The “authorised intermediary” that arranges your DRO deals with your creditors for you.


You can also get protection from your creditors while you get debt advice and apply for a Debt Relief Order. This is known as the Debt Respite Scheme or “Breathing Space” and can also be arranged by a suitably qualified debt adviser.


Drawbacks, Costs, and Risks


• You must pay an application fee of £90

• Your personal details get added to a public register

• Your credit rating will be seriously affected

• Certain types of employment could be put at risk

• There are restrictions against using further credit

• You may need to switch bank accounts


DRO Compared to an IVA


A Debt Relief Order will usually deal with your debts much faster than an IVA. Provided that your finances don’t improve, a DRO will end after one year and your qualifying debt gets written-off. An Individual Voluntary Arrangement (IVA) will usually run for a minimum term of five years.


Using a Debt Relief Order could also cost you much less overall. There’s a single £90 application fee to pay at the beginning and no further payment to make thereafter. With an IVA you’ll be making a payment every month, usually for five years (or longer).


The approval of creditors is not required to use a DRO. All of your qualifying debts get dealt with. If more than 25% of the creditors object to your IVA, the process cannot go ahead. Unsupportive creditors cannot prevent you from using a Debt Relief Order.


It is possible to enter a joint IVA which is also known as an “interlocking IVA”. You cannot enter a joint DRO and will need to make separate individual applications instead.


If you qualify for a Debt Relief Order, we recommend that you seriously consider using this option rather than an IVA. Debt solution providers do not profit from promoting or arranging Debt Relief Orders. They can profit substantially by promoting and arranging IVAs. For this reason, IVAs are heavily marketed. Some critics believe that too many people are being mis-sold an IVA or being swayed by one-sided marketing of this particular debt solution.


This criticism applies particularly to low-contribution IVAs, where you might (for example) pay £80 or £90 per month. A different debt adviser might calculate your disposable income to be £75 or less, which could mean you qualify to use a DRO instead. Sadly, a large number of low-contribution IVAs fail before they are completed because the agreed payment isn’t genuinely affordable. Using a Debt Relief Order instead avoids this risk of failure.


How does a DRO Work?


1. Contact an "authorised intermediary"

2. Supply information and receive debt advice

3. Application prepared by the DRO adviser

4. Pay the £90 application fee

5. Application submitted to the Insolvency Service

6. Decision made by the Insolvency Service (10 working days)

7. Cooperate with the Official Receiver as required

8. Discharged from DRO (and your debts) after twelve months


What Debts Are Included & Excluded


Almost all debts get included in a Debt Relief Order. This includes consumer credit accounts like bank overdrafts, unsecured loans, and credit cards. It includes catalogue accounts, utility bill arrears, and council tax arrears.


Some types of debt that are excluded from a DRO are:


• Mortgages or secured loans

• Hire purchase (for goods you need to keep)

• Child support or maintenance payments

• Court fines

• TV licence debts

• Confiscation orders

• Social fund loans

• Injury (or death) compensation


It’s vital that you inform your adviser about all of your debts before your application is submitted. Any debts that get missed out cannot be added later. If it later turns out that your debt was more than £30,000, your DRO is likely to be cancelled.


Debts obtained by fraud count towards the £30,000 debt limit. However, such debts will not be written-off when your Debt Relief Order ends.


Joint Debts & Guarantor Loans


Your Debt Relief Order only cover your personal liability for a debt. By entering a DRO you will not protect anyone else that also has liability for a debt you owe. For example, if you have a joint debt the other person will continue to be liable for the repayments. If you have a guarantor loan, the lender will still be able to chase your guarantor for payment.


Joint Debt Relief Order


Joint Debt Relief Orders do not exist. If you are a couple with debt problems, you could each make a separate DRO application. This could still be organised by dealing with a single DRO adviser together.


Employment Risks


Most people can use a DRO without any risk to their job. However, some employment sectors are concerned about the financial status of their staff. A DRO is a type of personal insolvency and is considered a serious financial step to take.


The financial services industry is a sector where employees might face insolvency restrictions. This could apply if you work for a bank, as a mortgage adviser, or in financial advice. You should consult your contact of employment, handbook, trade union, and/or HR department, before you apply for a DRO.


Restrictions and disclosure obligations are common for those in disciplined types of work. You’ll need to be cautious about your approach to tackling debt if you work in the police, prison service, or the military for example.


Professionals may also face restrictions regarding personal insolvency. This could apply if you’re a solicitor or accountant for example. Take time to understand the obligations that your professional regulator and/or employer places upon your personal financial conduct.


You should also be cautious (and get expert advice) if you operate in business. For example, you will be unable to serve as a company director until you have been discharged.


Can A Debt Relief Order Fail?


An application could get rejected if you don’t meet the criteria, failed to cooperate sufficiently, or if your honesty is questioned. You can request a reconsideration if you consider you’ve been treated unfairly.


Your DRO could fail if your financial situation improves before you get discharged. For example, you might receive a lump sum (or property) that could be used to repay your debts. Another example could be that your income increases and you can afford to pay towards the debts again. A DRO will only write off money that you cannot afford to repay.




An IVA could be a useful alternative if you do not qualify for a Debt Relief Order. This option is available if you are a homeowner or own a car worth more than £2,000 that you need to keep. An IVA is also available if your debt level exceeds £30,000 or your disposable income exceeds £75 per month. Before proceeding with an IVA it’s wise to familiarise yourself with the associated risks.


If you do not qualify for a DRO, bankruptcy could also be considered. You can still access bankruptcy if your total debts exceed £30,000 and if your disposable income is higher than £75 per month. Homeowners can also choose to become bankrupt, though this could put your home at serious risk.


A debt management plan is an informal alternative to a Debt Relief Order. This debt solution is not insolvency and it isn’t recorded on a public register. A DMP does not take your assets into account and is therefore available to homeowners. It’s also less likely than insolvency to affect your employment.


How to Apply for a DRO


To apply for a Debt Relief Order you need the services of an “authorised intermediary”. These intermediaries are qualified debt advisers with special permission to arrange this debt solution. They’ll work with you to confirm that you qualify for a DRO and check that it is suitable for your needs. You’ll be asked to provide documents to help verify that this debt solution is right for you.


If you would like local advice and support, consider contacting your local Citizens Advice. Most Citizens Advice centres offer the services of a DRO adviser. You could also consider national telephone-based services. To find out about more local and national services, and to be connected with them, we suggest that you contact the Money Advice Service.


Get Debt Advice


For expert debt management advice, please get in touch. Our advisers are qualified, experienced, and friendly. All conversations are held in strict confidence. We’ll advise you about the debt solutions you qualify for and which might best meet your needs.



Author: Andrew Graveson

Qualified Debt Adviser & IVA-Guide.co.uk Founder


Page Last Updated: 01/06/2021




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