Asset Limits for Debt Relief Orders 2026 – October 2026

The eligibility criteria for Debt Relief Orders (DROs) are strict but clear. Understanding these limits could save you from choosing the wrong debt solution. If you’re struggling with debt in England and Wales, knowing the precise requirements for a DRO can help you determine if this is the right path for you. Let’s delve into the specifics of DRO qualification criteria and asset/income limits for 2026.

Understanding Debt Relief Orders

A Debt Relief Order is a government-backed method of debt relief for individuals with low income and minimal assets. It offers a 12-month moratorium period where creditors cannot take action against you, and at the end of this period, your debts are written off. However, the eligibility criteria are specific, and you must meet all the requirements.

Debt Relief Orders provide a legal way to manage debt without the need for court proceedings. Introduced in 2009, DROs are designed to help those who cannot afford to pay off their debts within a reasonable time frame. During the 12-month moratorium period, creditors are prohibited from contacting you or enforcing any debt collection measures. This breathing space can be invaluable, allowing you to focus on stabilising your financial situation without the anxiety of creditor harassment.

Maximum Debt and Income Requirements

As of June 2026, to qualify for a DRO, your total debts must not exceed £50,000. This limit was increased from £30,000 in June 2024. Additionally, your disposable income, defined as the money left after paying essential living costs, should be less than £75 per month. This threshold was raised from £50 per month as of April 2021.

To put this into perspective, imagine you have a monthly income of £1,200. After covering essential expenses such as rent, utilities, food, and transport, you are left with £70. This remaining amount falls below the £75 threshold, potentially qualifying you for a DRO. However, it’s crucial to accurately calculate your disposable income, factoring in all necessary expenses to ensure you meet the criteria.

Asset Limits and Restrictions

Your assets must be valued at less than £2,000 to be eligible for a DRO. This limit was raised from £1,000 in June 2024. Importantly, if you own a vehicle, its value must not exceed £4,000, another increase from the previous £2,000 limit. You cannot qualify for a DRO if you own a home.

Assets are defined as anything of value that can be sold to pay off debts. This includes savings, investments, and valuable personal possessions. For example, if you own jewellery worth £1,500 and a car valued at £3,500, you would meet the asset criteria. However, it’s important to note that certain essential items, like clothing and basic household furniture, are not considered assets for DRO purposes.

The Application Process

Applying for a DRO can only be done through an approved debt adviser. You cannot apply by yourself. This ensures that you receive proper advice and that the DRO is the best option for your circumstances. Once your application is submitted and approved, you’ll enter a 12-month moratorium period, during which your creditors cannot pursue you for your debts.

To start the application process, you must first contact a reputable debt advice organisation, such as a charity or a licensed debt adviser. They will conduct a thorough review of your financial situation, ensuring that a DRO is the most suitable solution. Your adviser will help you gather the necessary information, such as proof of income, a list of debts, and a valuation of your assets, to complete the application accurately.

Common Mistakes to Avoid

One of the most common mistakes is underestimating your assets or overestimating your allowable income. Ensure you accurately calculate your total debts and assess the value of your assets. Failing to meet the eligibility criteria due to miscalculation can result in a rejected application.

Additionally, attempting to hide assets or provide misleading information can lead to severe consequences, such as being barred from future debt relief options or legal action. It’s crucial to be transparent and honest throughout the application process. Double-check all figures and seek clarification from your debt adviser if you have any doubts.

Alternative Debt Solutions

If a DRO isn’t suitable, other debt solutions may be more appropriate. Understanding these options is crucial before making any decisions.

Individual Voluntary Arrangements (IVAs)

An IVA is a formal agreement with your creditors to pay off your debts over typically five years. If you’re a homeowner, you may need to release equity in the final year, extending the duration to six years. At least 75% of your creditors by value must agree to the terms. The fees for an IVA are included within your monthly payments, not added on top.

Unlike a DRO, an IVA is suitable for those with a regular income and the ability to make consistent monthly payments. For example, if you owe £60,000 to various creditors, and they agree to an IVA, you might pay back £300 per month over five years, totalling £18,000. The remaining debt is then written off. This can be a more controlled way to manage significant debt, provided you can maintain the payments.

Bankruptcy

Bankruptcy is a more drastic measure, costing £680. It typically lasts 12 months, after which most of your debts are discharged. However, your home and other significant assets may be at risk. It’s essential to consider the long-term implications of bankruptcy before proceeding.

Bankruptcy can provide a fresh start for those overwhelmed by debt, but it comes with significant consequences. For example, if you own a home with equity, it could be sold to repay creditors. Additionally, your credit rating will be severely affected, making it difficult to obtain credit for several years. It’s advisable to explore all other options before choosing bankruptcy.

Debt Management Plans (DMPs)

A DMP is an informal agreement to pay back your debts in full. It is not legally binding, and creditors are not obliged to freeze interest or fees. While it can provide some relief, it doesn’t offer any debt write-off, and you’ll need to repay the total amount.

DMPs are often suitable for those with multiple creditors but manageable debt levels. For instance, if you owe £15,000 across five credit cards, a DMP could consolidate your payments into one monthly amount. However, because it’s informal, creditors can still pursue legal action or change terms, so it’s important to maintain good communication with them.

Breathing Space

Breathing Space is not a debt solution but a temporary protection, lasting 60 days, during which creditors cannot take action against you. You must apply through a debt adviser, and it provides breathing room to assess your options without immediate creditor pressure.

This scheme is particularly beneficial if you’re experiencing a temporary financial crisis, such as losing a job or facing unexpected expenses. During the Breathing Space period, you can work with a debt adviser to explore long-term solutions without the stress of creditor contact. However, it’s important to note that interest and charges may still accrue during this time, so it should be used as a springboard to more permanent solutions.

Frequently Asked Questions

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