Debt Relief Order

In April 2009, the Government introduced the Debt Relief Order (DRO), which is intended to help people in England & Wales deal with unmanageable unsecured debts. It was part of a Government package of measures designed to assist people affected by the UK's recession.

A Debt Relief Order has been described as an alternative to full bankruptcy as it has the same restrictions but costs much less. It lasts for a period of 12 months but your debts won't be cleared until the end of this period. During this time, no action can be taken by your creditors as long as you continue to meet the criteria.

Applying for a debt relief order

In order to get advice and assistance with a Debt Relief Order, you must speak with a Competent Authority. A Competent Authority will have Approved Intermediaries who are authorised by the Government to submit an application on your behalf to the Insolvency Service. There is a fee of £90 for the application and this must be paid before the DRO can be approved. You have 6 months to pay this fee.

There are conditions you must meet before you can make a Debt Relief Order application. These conditions are:

  1. You must have qualifying debts of under £15,000 (qualifying debts are personal loans, credit cards, overdrafts, store cards or catalogues; utility arrears; overpayments of benefits/tax credits and Hire Purchase and Conditional Sale agreements. Non-qualifying debts are student loans, court fines and child maintenance payments including debts to Child Support Agency)
  2. You must not have surplus income of more than £50 per month
  3. You must not have assets worth more than £300 collectively, including any pension fund
  4. You must not have a vehicle worth more than £1,000
  5. You must not have any interest in any property, mortgaged or otherwise
  6. You must have lived in England or Wales or carried on a business in England or Wales within the last 3 years

If your circumstances improve during the 12 month Debt Relief Order period, you must let the Official Receiver know. The DRO may be revoked, meaning you would be liable for the debts again. Similarly, if you acquire or inherit funds/assets, the Official Receiver must be notified.

As with bankruptcy, the restrictions of a Debt Relief Order include not obtaining credit of more than £500 without advising the lender that you are subject to a Debt Relief Order. If you do not adhere to the terms of the Debt Relief Order the Official Receiver can impose a Debt Relief Restriction Order on you, which would lengthen the time that you are restricted on doing certain things. This could be anywhere between 2 and 15 years.

Advantages:

  • Lasts for a fixed 12 month period
  • Debts will be cleared at the end of this time
  • Impartial advice from an Approved Intermediary
  • Alternative to bankruptcy

Disadvantages:

  • Only accessible by people who have debts of less than £15,000
  • If circumstances change, the DRO can be revoked meaning you are liable for debts again
  • Some debts can't be included
  • £90 application fee

Find out more

For more information about a debt relief order, please contact us for some free, no obligation help and advice.

Campbell Dallas Debt Solutions - if you have debt problems, we have debt solutions.

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