Debt Relief Order (DRO)

A Debt Relief Order (DRO) is a form of insolvency which is designed to help people who have relatively low debt, little surplus income and few valuable assets.

A DRO is similar to bankruptcy, but for people with income and assets of low value enough to be excluded from bankruptcy – so the process is less complex and cheaper.

Debt Relief Order (DRO)

A DRO allows people make a fresh start in 12 month and to get the protection of insolvency only previously available by bankruptcy.

DRO’s were introduced in part as the fees to petition for your own bankruptcy (currently £680) meant many people for whom this was a suitable course of action were unable to afford to do so.

Getting a DRO

An application for a DRO must be done via an approved intermediary. You should first seek professional advice, and if a DRO is considered suitable, you will be referred to an approved intermediary.

An approved intermediary is someone who has been approved by a competent authority chosen by the Government.

Swift do not currently offer DROs but offer a free consultation to determine your suitability and will refer you accordingly.

The approved intermediary will help you complete the online application, and submit it for you to a Government official called the Official Receiver. The Official Receiver then makes the order if appropriate.

DRO Criteria

To be able to apply for a Debt Relief Order you must meet all the criteria below:

  • Be unable to afford current repayments and charges.
  • Owe no more than £20,000 in unsecured debts.
    You must include ALL your debts. You can’t selectively write off part of a larger total by a DRO.
  • Have assets totalling no more than £1000 excluding a motor vehicle.
    Only non-essential items that can easily be sold are taken into account. You can own a car worth up to £1,000.
  • Have a disposable income of no more than £50 per month.
    This is your income minus reasonable living expenses, not counting your credit repayments, as defined using creditor accepted guidelines.
  • Be domiciled in England or Wales;
    or for the last three years have been resident or carrying on business there.

DRO Benefits

Affordable costs

The fee (£90) is affordable and can be paid by instalments but must be paid before the application can be made.

Confidence of good advice

The approved intermediary ensures that you are given appropriate advice and that you fit the criteria for a DRO.

All debts written off

A DRO last for 12 months, and once completed you are released from all your debts.*

Creditor protection

Creditors included in the DRO cannot take further action against you without the Court’s permission.

*You will remain liable to pay certain debts – in particular: Student loans, Fines, Debts arising from family proceedings, Budgeting loans and crisis loans owed to the Social Fund.

DRO Considerations

Not private

Being subject to a DRO is recorded in the Personal Insolvency Register.

You can’t already be insolvent

You may not be currently bankrupt, subject to bankruptcy restrictions, in an IVA or have had a DRO in the last 6 years.

Not for homeowners

You won’t be able to have a DRO if you own a house, even if it has no equity in it.

Debt relief restrictions order (DRRO)

You will be committing an offence if you get credit of £500 or more without disclosing that you are subject to a DRO.

Employment implications

Those subject to a DRO may be excluded from certain professions and roles.

Business implications

You can’t act as a director of a company or be involved in its management unless the court agrees and a person subject to a DRO who runs a business must disclose the name in which a DRO was made to all those they deal with.

Co-operation required

Your DRO could be cancelled if you don’t co­operate with the official receiver while the DRO is in force.

Restrictions on credit

You will be committing an offence if you get credit of £500 or more without disclosing that you are subject to a DRO.

Affect on credit rating

A DRO will affect your credit rating for up to 6 years.

If during the DRO your circumstances change such that you no longer qualify; for example you can afford more than £50/month towards your debts; you’re legally obligated to inform the Official Receiver. The DRO will be terminated and you’ll be back where you started – remaining liable for the debts in full.