Asset Limits for Debt Relief Orders 2026 – September 2026
Before applying for any debt solution, check if you meet Debt Relief Order (DRO) requirements. A DRO could save you thousands of pounds and provide a fresh financial start. This article will guide you through the detailed qualification criteria and asset limits for DROs as of September 2026 in England and Wales.
Understanding Debt Relief Orders (DRO)
A Debt Relief Order is a debt solution designed for individuals with low income, minimal assets, and debts they cannot repay. It offers a way to write off debts after a 12-month moratorium period, during which your financial situation is assessed. During this time, creditors are unable to take action against you, providing a temporary reprieve from financial pressure. This can be a valuable period to stabilise your financial situation without the constant stress of creditor demands.
Eligibility Criteria for DRO
- Maximum Debt: You must owe less than £50,000. This limit was increased from £30,000 in June 2024. This change allows more individuals to qualify for a DRO, reflecting the rising cost of living and increasing debt levels.
- Spare Income: Your disposable income must be less than £75 per month. This threshold was increased from £50 in April 2021, acknowledging the financial pressures faced by individuals with limited income.
- Asset Limit: You must own assets worth less than £2,000, a change from £1,000 since June 2024. This excludes essential items like household goods and clothing.
- Vehicle Limit: You cannot own a vehicle valued at £4,000 or more, up from £2,000 as of June 2024. This ensures that individuals with significant vehicle assets do not take advantage of this solution.
- Homeownership: You cannot own your home to qualify for a DRO. This is because a home is considered a significant asset that could be used to repay debts.
Process of Applying for a DRO
Applications for DROs must be made through an approved debt adviser. You cannot apply for a DRO on your own. The process is as follows:
- Consult a Debt Adviser: Find an authorised adviser who will assess your financial situation. Organisations such as Citizens Advice or StepChange can provide access to authorised advisers.
- Prepare Your Information: Gather details about your debts, income, and assets. Accurate documentation is crucial, so ensure you have recent bank statements, pay slips, and a detailed list of all debts.
- Application Submission: Your adviser will submit the application on your behalf. They will ensure all information is correct and complete to avoid delays or rejection.
- 12-Month Moratorium: During this period, your creditors cannot take action against you. Use this time to improve your financial literacy and consider long-term financial planning.
- Debt Write-Off: If your situation remains unchanged, your debts are written off after 12 months. This provides a clean slate to rebuild your financial health.
Common Mistakes to Avoid
Ensure that all debts and assets are accurately reported to avoid application rejection. Double-check your eligibility, particularly regarding income and assets. Work closely with your adviser to ensure all information is complete and accurate. Misreporting or omitting information can lead to your DRO being revoked, which can result in severe financial and legal consequences.
Comparing Debt Solutions: IVA, Bankruptcy, DMP, and Breathing Space
Individual Voluntary Arrangements (IVA)
An IVA is a formal agreement to pay off your debt over time. It typically lasts five years or six if you need to release home equity.
- Creditor Approval: At least 75% of creditors by value must agree to the IVA. This means that the majority of your creditors must agree to the terms, which can include reduced payments.
- Fees: Fees are included within your monthly payments, not added on top. This can make an IVA a more affordable option for managing debt.
- Homeownership: Homeowners can apply but may need to release equity in the final year. This can be a disadvantage if property values fall.
Bankruptcy
Bankruptcy is a more drastic solution, usually resulting in discharge after 12 months. The cost is £680, and your home may be at risk. Bankruptcy can wipe out most debts, but it also involves the sale of any significant assets and can have long-term effects on your credit rating.
Debt Management Plan (DMP)
A DMP is an informal agreement to repay all debts. It is not legally binding, and creditors are not obliged to freeze interest or charges. It can be a flexible option if you have a steady income and can negotiate favourable terms with your creditors.
Breathing Space
Breathing Space offers temporary protection from creditor action for 60 days. It is not a debt solution and must be arranged through a debt adviser. This can provide short-term relief while you explore more permanent solutions.
Practical Guidance for Choosing the Right Solution
Consider your financial situation carefully. If you meet the DRO criteria, it can be a cost-effective way to resolve your debts. However, if you have a higher income or significant assets, other solutions like an IVA or DMP may be more appropriate. Assess your financial goals and speak with a debt adviser to determine the best course of action. Remember, the right solution can help you manage your debts more effectively and pave the way toward financial stability.
Frequently Asked Questions
What happens if I acquire new assets during the DRO period?
If your assets increase to over £2,000 during the 12-month moratorium, you must inform your adviser. This could affect your DRO eligibility. In such cases, you may need to consider alternative debt solutions.
Can I apply for a DRO if I am self-employed?
Yes, self-employed individuals can apply for a DRO, provided they meet the eligibility criteria regarding debt, income, and assets. It is important to provide detailed accounts of your income and expenses to ensure accurate assessment.
Will a DRO affect my credit rating?
Yes, a DRO will negatively impact your credit rating and remain on your credit file for six years from the date of approval. This can affect your ability to obtain credit in the future, so consider this when applying.
How often can I apply for a DRO?
You cannot apply for a DRO if you have had one in the last six years. This limitation encourages individuals to seek long-term financial stability rather than relying on repeated debt relief measures.
Are student loans included in a DRO?
No, student loans are not included in a DRO and will remain payable. It is important to plan for these payments separately, as they will not be discharged under a DRO.
Not Sure Which Debt Solution Is Right for You?
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