A Debt Relief Order (DRO) is a way to have your debts written off if you owe less than £20,000, and don’t have much spare income or many assets.
Debt Relief Orders
A Debt Relief Order (DRO) is a way to have your debts written off if you owe less than £20,000, and don’t have much spare income or many assets. A DRO freezes interest and payments for 12 months, and if your financial situation hasn’t changed in that time, all of your debts included in it are written off.
With a DRO:
- your creditors can’t chase you for debts during the DRO
- your payments stop while you’re in a DRO
- you’re usually freed (‘discharged’) from your debts after 12 months
Conditions of a DRO:
- A DRO is only available if you live in England, Wales or Northern Ireland, and owe less than £20,000
- There’s a one-off, non-refundable fee of £90 payable to the Insolvency Service.
- You can’t apply if you own your home
- A DRO will appear on a public register
Pro’s and ConsThe biggest advantages might be the cost and the length of time it takes to become debt-free. In 12 months all of the debts included in it are written off, and the £90 fee is relatively inexpensive. Created for people with low income and very few assets, DRO’s can be great for people struggling with debts who have very little chance of paying them back. One of the disadvantages is that DRO’s only cover specific debts – you’ll still need to pay your rent and bills. There are some other restrictions (explained below), and a record of the DRO will appear on your credit report for 6 years. If your financial situation improves your DRO can be cancelled.
You’re generally eligible if you meet all of these criteria:
- you owe less than £20,000
- you have less than £50 spare income each month
- you’ve got less than £1,000 worth of assets
- you’ve lived or worked in England and Wales within the last 3 years
- borrow more than £500 without telling the lender about your DRO
- act as the director of a company
- manage a business without disclosing your DRO
The restrictions usually last for the 12 month term of the DRO.