Debt Relief Order (DRO) Complete Guide 2026 – June 2026

A Debt Relief Order (DRO) could be the debt solution you need. If you have low income, minimal assets, and debts under £30,000, a DRO might clear your debts completely.

Understanding Debt Relief Orders

A Debt Relief Order (DRO) is a form of insolvency designed to help people with low income and few assets get back on their feet by writing off their debts. It is a legally binding process that offers a fresh start for those who qualify. Introduced in 2009, DROs are aimed specifically at those who do not have the means to repay their debts and who do not own significant assets.

How a DRO Works

Once a DRO is approved, your creditors cannot take any action to recover their money without the court’s permission. The order lasts for 12 months, during which you do not have to make payments towards most of your debts. At the end of this period, if your financial situation has not improved, the debts included in the DRO are written off.

The process is designed to be as stress-free as possible, allowing you to focus on stabilising your financial situation without the constant pressure from creditors. It’s important to note that not all debts can be included in a DRO. Debts like student loans, court fines, and child maintenance payments remain payable. Being aware of what can and cannot be included is crucial to managing your expectations and planning effectively.

Eligibility Criteria for a DRO

To qualify for a DRO in England and Wales, you must meet certain criteria. These requirements ensure that DROs are only granted to those who genuinely need them.

Debt and Asset Limits

• Your total debts must not exceed £30,000.
• You must have less than £75 in disposable income each month after paying essential living expenses.
• Your assets must be valued at less than £2,000 in total.
• You must not own a vehicle worth more than £2,000, unless it’s specially adapted for a disability.

These financial thresholds are set to ensure that DROs are used as a last resort for those in genuine need. For example, if you have a car that is a necessity for work but exceeds the £2,000 limit, you may need to explore alternative solutions such as an Individual Voluntary Arrangement (IVA) or bankruptcy.

Additional Requirements

• You must be living in England or Wales, or have lived or carried on business in these countries in the last three years.
• You cannot have had a DRO in the past six years.
• You must not be involved in any other formal insolvency proceedings, such as bankruptcy or an Individual Voluntary Arrangement (IVA).

These criteria ensure that DROs are reserved for individuals who have no other feasible options. If you have previously had a DRO, it’s important to explore other debt solutions with a financial adviser, as repeating the process is not possible within a six-year timeframe.

The DRO Application Process

Applying for a DRO involves several steps and requires careful planning. Here’s a detailed look at the process:

Step-by-Step Guide to Applying for a DRO

1. Seek Professional Advice: Before starting your application, consult a debt adviser. They will assess your financial situation and confirm whether a DRO is the right solution for you. You can find a list of approved debt advisers through organisations like StepChange or Citizens Advice.
2. Gather Necessary Information: Collect details about your debts, income, and assets. You will need this information to complete your application accurately.
3. Choose an Approved Intermediary: A DRO must be submitted through an approved intermediary, who will complete the application on your behalf. They will ensure that all details are correct and that you meet the eligibility criteria.
4. Pay the Fee: A DRO application requires a fee of £90. This fee is non-refundable and must be paid before the application is submitted. Consider budgeting for this expense in advance, as it’s a vital part of the application process.
5. Submit the Application: Your intermediary will submit the application to the Insolvency Service. Once submitted, you will receive confirmation and your application will be reviewed.
6. Await the Decision: The Insolvency Service typically takes around 10 working days to process a DRO application. If approved, you will be notified, and the DRO will be in effect for 12 months.

Common Mistakes to Avoid

• Underestimating Debts: Make sure all your qualifying debts are included in the application, as any missed debts will remain payable.
• Incorrect Asset Valuation: Ensure that you have accurately assessed the value of your assets, as incorrect valuations can affect your eligibility.
• Failing to Seek Advice: Always consult a debt adviser to ensure a DRO is the best option for your circumstances.

Real-world scenarios show that individuals often overlook smaller debts or inaccurately report asset values, leading to application rejections. Double-checking figures and seeking professional advice can prevent these issues.

Benefits and Drawbacks of a DRO

While a DRO can be beneficial, it is important to weigh the pros and cons to determine if it is the right choice for you.

Benefits of a DRO

• Debt Relief: A DRO provides a way to write off debts that you cannot repay, giving you a fresh start.
• Protection from Creditors: Creditors cannot pursue you for debts included in the DRO during the 12-month period.
• No Repayment Requirements: Unlike other debt solutions, you do not have to make payments during the DRO period.

For example, someone earning minimum wage with no significant assets would greatly benefit from the protection a DRO provides, allowing them to focus on improving their financial situation without harassment from creditors.

Drawbacks of a DRO

• Credit Impact: A DRO will remain on your credit record for six years, impacting your ability to obtain credit.
• Limited Eligibility: Not everyone will qualify for a DRO due to the strict criteria.
• Public Record: A DRO is recorded on the Insolvency Register, which is publicly accessible.

It’s important to consider how these drawbacks might affect your future plans. For example, if you’re planning to apply for a mortgage within the next six years, the credit impact of a DRO could make this difficult.

After Your DRO Ends

Once your DRO period ends and your debts are written off, it’s crucial to manage your finances carefully to prevent future debt problems. Consider creating a budget, saving for emergencies, and seeking financial advice to maintain stability.

Practical steps include setting up a simple budgeting system, perhaps using an app or spreadsheet, to track your income and expenses. Building an emergency fund, even if it’s small, can provide a buffer against unexpected expenses. Additionally, consider attending financial literacy workshops or consulting with a financial adviser for ongoing support.

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