Debt Relief Order - (DRO) | Debt Solutions Explained | M1 Debt Solutions

Debt Relief Order (DRO)

Information about the most popular debt solutions

What is a Debt Relief Order (DRO)?

A Debt Relief Order is a way of managing and dealing with your debts if it gets to the point that you can’t pay them.  One of the main benefits of a DRO is that you don’t have to make payments towards most types of debt included in the DRO, and creditor can’t force you to pay of the debts.  The order usually last for 12 months, meaning you won’t have to pay some of these debts off for that period.

If your situation hasn’t changed when the Debt Relief Order comes to an end, the debts included in it will be written off or discharged and you won’t need to pay them off.  If your circumstances improve meaning you can pay off some of your debts, your DRO may be voided so you can pay off some of your creditors.

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How do you apply for a Debt Relief Order?

You can only apply for a DRO through a specialist adviser referred to as an ‘approved intermediary’.  You can’t apply for one yourself, you have to ask an authorised debt advisor to do it for you.  You must inform the adviser of your situation and they will advise whether a relief order is the right thing for you.  They will give you advice on how to apply and they will make the application on your behalf.  They will explain what information is to be included in the application and work with you to complete it.  They will send it to the Official Receiver on your behalf.

You will have to tell the Official receiver if you have given away any of your assets, or sold them for less than the value in the last two years.  Equally you will need to advise them if during this time period if you have paid some creditors but not others.

Do I qualify for a Debt Relief Order?

There are strict requirements to be eligible to qualify for a DRO.  You must:

  • Live in England or Wales (or have lived or run a business in England or Wales in the last three years)
  • Have total debts of £20,000 or less at the date of application
  • Be unable to pay off your debts
  • Not be a homeowner
  • Have assets less than £1,000
  • Not have a car or motorbike worth £1,000 or more
  • Not have had a DRO in the last six years and you’re not going through another formal insolvency procedure, for example bankruptcy or an Individual Voluntary Arrangement (IVA)
  • Have £50 or less in spare income a month, after all normal household expenses are taken into account

How much does it cost to apply for a DRO?

The Official Receiver’s fee is £90 which must be paid in cash and is non-refundable, even if your order isn’t granted.  Your debt adviser might be able to offer guidance on getting support to pay the fee.  Some people are eligible to get a charity to pay their fee?

Before you apply you need to do personal budget to see how much money you have coming in and going out.  You will need to collate all details about your debts and how much you owe each creditor.  You might want to check your credit reference file to make sure you have included everything.

What Debts are covered by a DRO?

Debts that are included:

  • Credit Cards, overdrafts and loans
  • Hire purchase agreements
  • Business debts including money owed to employees, suppliers or customers
  • Personal debts you owe to family and friends
  • Buy now pay later arrangements
  • Benefits overpayments
  • Arrears linked to rent, utility bills, telephone bills, income tax and council tax
  • Catalogue debts
  • Parking Penalty Charges

What Debts are not covered by a DRO?

There are some debts which are excluded which include:

  • Student loans
  • Social fund loans
  • Compensation claims against you for death and injury
  • Child support and maintenance
  • Magistrates court fines
  • Money owed under a criminal confiscation order
  • Budgeting loans and crisis loans

What happens once you have applied for a DRO?

The Official Receiver will send you a letter confirming whether they have approved or rejected your application.  If your application is rejected, the OR will tell your and your adviser the reasons why.

If it’s approved the OR will advise you and will also send the order to all the relevant creditors.  Your creditors may disapprove to being included in the DRO, however it is not a valid reason for them to object just because they don’t want to be included in the order.

If the DRO proceeds, all the debts included in the order are put on hold for a year.  This is referred to as the moratorium period.  You shouldn’t need to make any payments on your debts, although there may be some exceptions to this rule.  Furthermore, your creditors are not allowed to ask you to make any more payments.  If they do, inform them of the Debt Relief Order that is in place.

Will a DRO impact my credit rating?

The order will be on your credit file for six years.  It is important to note, even after six years it may impact your ability to get a mortgage.

Will a DRO be on the Insolvency Register?

The Relief Order will be held on the Insolvency Register for the 12 months of the duration of the DRO, plus an extra 3 months.

What are the effects of a DRO?  What do I need to bear in mind?

Certain restrictions will be placed on your for the 12 month duration of the order.  These include:

  • Your bank account may be frozen.
  • The DRO will be recorded on your credit file and the Individual Insolvency Register
  • If you rent your home, your tenancy agreement may be impacted.
  • If you take out credit of £500 or more, you must tell the lender about the Debt Relief Order
  • You will need the permission from the court if you want to become a company director, or be involved in the formation or promotion of a limited company
  • You may not be able to hold certain public offices and it may impact your job, if it says in your contract you are not allowed a DRO
  • You are unable to apply for a DRO again for six years

DROs are designed to help people with little or no assets become debt free in usually one year (12 months) and are an alternative insolvency debt solution to Bankruptcy or an Individual Voluntary Arrangement (IVA).

DRO Advantages

  • At the end of a DRO your debts will be written off
  • The fee of £90 is more affordable than some other debt solutions
  • You will keep any asset, including a car, providing it is not valued at £1000 or more
  • You could be debt free in one yearn the DRO

DRO Disadvantages

  • Your DRO is entered on a public register
  • You cannot enter into an DRO if you have an existing IVA, bankruptcy order or own your property
  • Employment could be affected (you cannot act as a director of a company)
  • You will remain liable for debts not included in the DRO
  • A Debt Relief Order (DRO) will stay on your credit file for six years.


Individual Voluntary Arrangement (IVA)

IVA – Individual Voluntary Arrangement

Debt Management Plan (DMP)

Debt Management Plan (DMP)




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Debt Relief Order

Updated on 2020-03-05T14:08:00+00:00, by admin_m1.