Debt Relief Order (DRO)

If you’re struggling with debt, a Debt Relief Order (DRO) might be an option for you.

What is a Debt Relief Order?

A DRO is an insolvency debt solution. It’s only available to people who meet specific criteria, and there are some restrictions you’ll need to stick to while you’re in a DRO. But, after a year, all of the debts included in your DRO will be written off, and you’ll be able to start afresh.

Can I get a Debt Relief Order?

To be eligible for a DRO in England, Wales and Nothern Ireland, you must:

owe £50,000 or less to unsecured debts
have assets worth £2,000 or less, excluding essential household items
if you have a car, it must be worth less than £4,000
have £75 or less available to pay your debts each month
not be a homeowner
currently live in England, Wales or Northern Ireland, or have lived and worked in England, Wales or Northern Ireland in the last three years

How does a Debt Relief Order work?

The first step to applying for a DRO is to speak to a debt advisor. They’ll review your circumstances with you and inform you about all the available options.

If you’re eligible for a DRO, you’ll need to apply through a company approved by the Financial Conduct Authority (FCA) to do so. Your debt advisor should provide details of approved and accredited companies that can process DROs.

They’ll have a specialist DRO advisor who will process your application. They’re known as an ‘approved intermediary’.

You won’t have to pay a fee to submit your application.

What happens when a DRO is approved?

If your DRO is approved, you’ll start a 12-month period, known as a ‘moratorium’. During this time, you’ll have some restrictions placed upon you, but you won’t have to pay any of the debts included in your DRO.

The interest and charges will be frozen, and the companies you owe money to won’t be able to chase you for payments.

It’s important to follow the rules and keep the Insolvency Service updated on any changes to your situation. If you don’t, your DRO could be revoked and your debts reinstated, including any interest and charges that might have accrued.

Can a Debt Relief Order be refused?

Yes. If your application is unsuccessful, the Insolvency Service will write to you to explain why it was refused.

Your application could be refused if you don’t meet the eligibility criteria, didn’t provide additional information when asked, or if the official receiver feels that your application wasn’t truthful.

It’s important to make sure that the information you provide to your approved intermediary is detailed, up-to-date and accurate.

What do I have to do in a DRO?

If your personal or financial situation changes, you must update the Insolvency Service.

During the 12-month ‘moratorium’ period, the restrictions mean that you won’t be able to:

apply for credit for £500 or more without telling the lender that you have a DRO
change your business name unless you tell everyone you do business with that you have a DRO
be involved with promoting, managing or setting up a Limited Company without permission from the court
act as a Company Director without permission from the court

What can be included in a DRO?

The types of debt that can be included are:

arrears for rent, utility bills, broadband, mobile phone contracts, council tax and income tax
National Insurance underpayments
overdrafts, personal loans or credit cards
benefit overpayments
Buy-Now-Pay-Later (BNPL) agreements
hire purchase or conditional sale agreements
money owed to family and friends or for services you’ve used

What can’t be included in a DRO?

The types of debt that can’t be included are:

legal fines, such as magistrates court fines or confiscation orders
child support or child maintenance arrears
student loans
social fund loans
compensation for death or injury

Will a DRO affect my credit score?

Yes. If you enter into a debt solution, it’ll show in some way on your credit report. However, if you’ve missed payments, the companies you owe money to might have applied defaults to your accounts.

Your credit score has likely already been impacted, so taking control now is the best way to start building a better financial future.

A DRO will affect your credit report similarly to other forms of insolvency, such as Bankruptcy or Individual Voluntary Arrangements (IVAs). The details of your DRO will be listed on the insolvency register for the duration of your DRO, and it’ll show on your credit report for six years from the date it’s approved.

Any negative factors on your credit report will make it difficult to obtain credit in the future, and you’ll need to let future lenders know that you’ve had a DRO if they ask.

How will a Debt Relief Order affect me?

Before you decide how you’re going to tackle your debts, it’s always good to have an understanding of how each one might affect you.

Here’s the pros and cons of a DRO:

Pros	Cons
A DRO will help you become debt-free faster than some other solutions. After 12 months, you’ll be discharged, and the debts included in your DRO will be written off.	The details of your DRO will appear on the Insolvency Register for its duration and your credit report for six years. As a result, you might find it difficult to get credit in the future.
You won’t have to speak to the companies you owe money to, and they won’t be able to take any legal action against you.	There can be serious consequences if you don’t comply with the DRO restrictions. Not sticking to the rules can result in fines, an extension of the restrictions or even a prison sentence.
It’s much more affordable than some other solutions, such as Bankruptcy. You won’t have to pay an application fee.	If your circumstances change, your DRO could be revoked. This means you’ll need to repay everything you owe, including any accrued interest and charges.
You can keep your car if its value is less than £4,000.	Some job roles or employment sectors have rules about insolvency. You may not be able to continue working in some professions, such as a Director of a Limited Company or a solicitor.
It’s unlikely that a DRO will impact a current tenancy/rental agreement.	The impact on your credit score could mean that you might find it challenging to move home while you’re in a DRO.