DRO Eligibility: Do You Qualify for Debt Relief Orders? – July 2026

A Debt Relief Order (DRO) could be the debt solution you need. If you have low income, minimal assets, and debts under £50,000, a DRO might clear your debts completely. This guide will help you understand if you qualify for a DRO, the process involved, and the benefits and drawbacks of this debt solution.

Understanding Debt Relief Orders (DRO)

Debt Relief Orders are designed for individuals in England and Wales who are struggling with debt but have limited means to pay it back. A DRO freezes your debt obligations for 12 months, after which your debts are typically written off, provided your situation hasn’t improved. This makes DROs an appealing option for those who meet the eligibility criteria.

Essentially, a DRO is a form of insolvency aimed at those with minimal assets and low income. It is less complex and less expensive than bankruptcy, providing a fresh start for those who qualify. The process is designed to be accessible, with the guidance of an approved debt adviser ensuring that applicants understand the implications and responsibilities involved.

Eligibility Criteria for DRO

To qualify for a DRO, you need to meet specific criteria:

• Debts: Your total debts must not exceed £50,000. This includes most unsecured debts such as credit cards, personal loans, and utility arrears.
• Income: Your spare income, after essential expenses, must be less than £75 per month. This ensures that a DRO is a suitable option for those who genuinely cannot afford to repay their debts.
• Assets: Your total assets must be under £2,000. This includes savings, valuables, and any other possessions of value.
• Vehicle: You cannot own a vehicle worth £4,000 or more. This ensures that high-value assets are not shielded from creditors.
• Homeownership: You cannot own your home. This criterion is crucial as owning property would typically provide a means to repay debts.
• Previous DROs: You must not have had a DRO in the last six years. This ensures that DROs are not used repeatedly as a means of avoiding debt repayment.

It’s important to note that while these criteria might seem restrictive, they are designed to ensure that only those truly in need of a DRO can apply. For many, meeting these criteria can be a relief, offering a structured path out of debt.

The DRO Application Process

Applying for a DRO is a straightforward process, but it must be done through an approved debt adviser. Here’s how it works:

1. Contact a Debt Adviser: Reach out to a certified debt adviser who will assess your financial situation and determine if a DRO is suitable for you. Organisations like Citizens Advice or StepChange can provide free advice.
2. Provide Information: You will need to provide details of your income, expenses, debts, and assets. This includes bank statements, payslips, and a list of creditors.
3. Application Submission: Your adviser will submit your application to the Insolvency Service if you meet the criteria. There is a £90 fee for the application, which is payable in instalments if necessary.
4. Approval and Moratorium Period: If approved, a 12-month moratorium period will start, during which your creditors cannot take any action against you. This provides breathing space to focus on improving your financial situation.
5. Debt Discharge: If your situation remains unchanged, your debts will be discharged after the moratorium period. This means you are no longer legally required to pay the debts included in the DRO.

Throughout this process, your debt adviser will be your guide, ensuring that you understand each step and are fully informed of your responsibilities and the potential outcomes.

Benefits and Drawbacks of DROs

While DROs can be a lifeline for many, it’s crucial to understand both the benefits and potential drawbacks.

Benefits

• Debt Relief: Your debts can be completely written off after 12 months, providing a fresh financial start.
• Free Application: As of June 2024, there is no application fee for a DRO, making it accessible for those with limited financial means.
• Legal Protection: Creditors cannot harass you during the moratorium period, offering peace of mind and security.
• Simple Process: The application process is straightforward and supported by professional advisers.
• Minimal Impact on Daily Life: Unlike bankruptcy, a DRO has less impact on your day-to-day life, allowing you to maintain a sense of normalcy.

Drawbacks

• Credit Impact: A DRO will negatively impact your credit rating for six years, making it difficult to obtain credit during this period.
• Asset and Income Restrictions: You must meet strict criteria regarding income and assets, which may exclude some individuals who are struggling with debt.
• Limited Frequency: You cannot apply for another DRO within six years, so it’s important to consider if this is the right solution for your circumstances.
• Public Record: A DRO is recorded on the Individual Insolvency Register, which is publicly accessible.

Understanding these benefits and drawbacks is essential in making an informed decision about whether a DRO is the best solution for your financial situation.

Alternative Debt Solutions

It’s important to consider all your options before deciding on a DRO. Here are some alternatives:

Individual Voluntary Arrangement (IVA)

An IVA allows you to pay off your debts over a period of typically five years. It requires approval from creditors holding 75% of your debt value. While homeowners can apply, they might need to release equity in the final year. Fees are included within your monthly payments. An IVA is a more formal arrangement than a DMP and offers legal protection from creditors.

For example, if you owe £30,000 and your IVA is approved, you might pay back £200 a month over five years, totalling £12,000. The remaining debt would be written off, offering substantial relief.

Bankruptcy

Bankruptcy is another option, costing £680. It usually results in discharge after 12 months, but your home and assets may be at risk, and it has a significant impact on your credit history. Bankruptcy is often seen as a last resort due to its severe implications, but it can provide a complete reset for those with overwhelming debt.

For instance, if you have no significant assets and your debts exceed £50,000, bankruptcy might be the most viable option. However, you must consider the impact on current and future credit applications.

Debt Management Plan (DMP)

A DMP is an informal agreement with your creditors to pay back your debts over time. It is not legally binding, and creditors are not obliged to freeze interest, but it can be a flexible solution. A DMP can suit those with a steady income but who need more manageable payments.

Consider a scenario where you owe £10,000 across several credit cards. A DMP could consolidate these payments into one monthly amount that fits your budget, making it easier to manage your finances.

Breathing Space

This is not a debt solution but provides temporary protection from creditor action for 60 days. You must go through a debt adviser to apply. Breathing Space can be useful if you need time to assess your financial situation and explore longer-term solutions without the pressure of creditor action.

For example, if you’re in the process of negotiating a DMP or IVA, Breathing Space can provide the necessary time to finalise these arrangements.

Not Sure Which Debt Solution Is Right for You?

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