Debt Relief Orders In The UK

by Thomas Vargo

A DRO or Debt Relief Order is an alternative to bankruptcy that can help you deal with certain types of debt if you have little spare income, don't own your home, and only have a small chance improving your financial situation. To get approved for a Debt Relief Order you must owe less than £15,000, have less than £50 a month spare income after paying essential bills like food or rent, have less than £300 worth of assets (motor vehicles are not included in this limit and you can usually keep your car if it is worth less than £1000 or you need it because you have a disability), live or run a business or own a property in Wales or England or have done so in the last 3 years and have not applied for a Debt Relief Order in the last 6 years. A DRO can be amended or canceled if your financial situation improves. Debt Relief Orders are issued by the Official Receiver (an officer of the bankruptcy court) who will write to your creditors.

Pros And Cons Of Debt Relief Orders - UK

Pros of a Debt Relief Order are as follows:

1) Creditors cannot take any action to recover their money without permission from the court.

2) You don't have to make any payments towards your debts.

3) When the Debt Relief Order ends, usually after 12 months, you will be discharged from your debts.

Cons of a Debt Relief Order are as follows:

1) Some types of debt that cannot be included in a DRO are usually family maintenance payments, court fines, debts and student loans created after your Debt Relief Order has been issued.

2) Your Debt Relief Order will be listed on the Individual Insolvency Register, an online database used by credit reference agencies to update your credit rating. This record will be removed three months after your DRO ends. Credit reference agencies keep Debt Relief Order records for six years which will make it harder for you to get credit or open up new bank accounts.

3) You must tell your building society or bank that you have a DRO, they will decide if you can continue using your accounts.

4) You must report any changes to your financial situation and co-operate with the Official Receiver as this can affect your DRO.

5) It is a criminal offense to break any of the following DRO restrictions: borrow more than £500 without telling the lender about your DRO, manage or create or promote a company without the court's permission, act as the director of a company, manage a business without telling those you do business with about your DRO, work as an insolvency practitioner (an authorized debt specialist).

Please Note: Debt Relief Order restrictions usually last until your DRO ends. They can continue for up to fifteen years if dishonest or criminal behaviour such as fraud led to your debt problem. The Official Receiver will investigate the cause(s) of your debt problem. You must co-operate and provide any financial information they ask for.

How to apply for a Debt Relief Order - UK

There are three steps that you have to follow to get approved for a Debt Relief Order which we have listed below.

1) Contact your local Citizens Advice Bureau or the National Debt Line for a list of authorized debt advisers in your area. The authorized debt adviser will check to see if you meet the conditions to qualify for a Debt Relief Order, help you complete the application form (for example, work out interest payments), send your application form to the Official Receiver (you can’t send it directly).

2) You must pay a £90 fee before the Official Receiver will consider your application. Your authorized debt adviser can advise you about paying in installments or contact your local Citizens Advice Bureau for information on charities that can help.

3) The Official Receiver will process your Debt Relief Order application and can issue a DRO, ask you for more financial information (such as bank statements), or reject your application.

Please Note: Contact an authorized debt adviser for help with the full conditions and what your options are if you are already involved in another formal insolvency procedure such as bankruptcy. Your local Citizens Advice Bureau or the National Debt Line can give you a list of authorized debt advisers in your area.