Debt Relief Order

A Debt Relief Order is an order available to residents of England, Wales and Northern Ireland and is granted by the Insolvency Service. It is designed to help debtors who have less than £30,000 of debt, a monthly disposable income of £75 or less, assets worth less than £2,000 and a vehicle worth less than a £2,000, put forward an application to freeze interest and further action from their creditors for a period of 12 months without repayment to the debt.

As with other statutory solutions an affordability assessment will take place by an approved intermediary who will assist the debtor with an application to the Insolvency Service for a DRO. This assessment will account for essential living costs and assets when considering the debtor’s ability to make payment to the debt. If no repayment is available the order may be granted. The Official receiver will also manage the Debt Relief order and liaise with creditors during the order.

A Debt Relief Order will usually last for 12 months, during which time a debtor will be subject to certain restrictions that prevent them from obtaining further credit of any more than £500 without disclosing to the lender they are subject to a DRO and they cannot act as a company Director without the court’s permission. At the end of the order, providing there has been no change in the debtor’s circumstances, the debts are ordered to be written off and creditors cannot legally pursue the debtor for further repayment.

Who may be suitable?

• Lives in England, Wales or Northern Ireland
• Debt Level – £30,000 or less
• Disposable Income – No ability to offer a sustainable repayment from income and or assets.
• Number of creditors – 2 or more
• No assets with a value of more than £2,000 & a vehicle worth no more than £2,000.
• Not previously entered a DRO in the last 6 years.

Risks and considerations:

• Failure to maintain repayments under the terms of your credit agreements or hire agreements may result in the loss of services or assets and may have a sever effect on your future credit rating.
• Failure to continue to pay taxes, fines, child support payments and other certain debts could result in the loss of access to essential goods or services or repossession of, or eviction from your home.
• If the arrangement of deed fails there is a risk of bankruptcy
• A failure to maintain contractual payments to your creditors could result in further recovery action from your creditors which may increase your debt to that creditor as any costs they incur may be added to the debt.
• There is expenditure restrictions placed on a person who is entering into a DRO.
• A DRO requires approval from an approved intermediary and there is a risk it may not be approved.
• Only debts included in the Arrangement will be discharged on successful completion and all debts not included will remain outstanding.

Find out more about:

Debt Relief Order Advantages and Disadvantages