A Debt Relief Order (DRO) is a form of debt relief available to individuals in England, Wales, and Northern Ireland who are struggling with unmanageable debt but have low income, few assets, and relatively low levels of debt. It’s a legal solution designed to help individuals with limited financial means get a fresh start by having their debts written off after a specified period, usually one year.
Here are some key points about Debt Relief Orders (DROs):
Eligibility Criteria
To qualify for a DRO, you must meet specific criteria, including:
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- Owning assets worth less than £2,000 (excluding a vehicle if it’s necessary for work)
- Owning a vehicle worth less than £1,000 (if you have one)
- Owning a total debt of £20,000 or less
- Having disposable income of £50 or less after essential living expenses
- Not being involved in other formal insolvency procedures (like bankruptcy or an IVA)
- Not having had a DRO in the last six years
Debt Relief Order – Application Process
You need to apply for a DRO through an authorized debt adviser or an approved intermediary. They will help you assess your eligibility, complete the application, and submit it to the Official Receiver, who is responsible for processing DRO applications.
Debt Relief Order – Application Fee
As of my last update in September 2021, there’s a fee to apply for a DRO. However, this fee can be paid in installments over a six-month period. In cases of extreme financial hardship, the fee may be waived.
Debt Freeze
Once your DRO is approved, your creditors are prohibited from taking any legal action against you or pursuing your debts for the duration of the DRO, usually one year.
Debt Write-Off
If your financial situation doesn’t improve during the DRO period and you continue to meet the eligibility criteria, your debts will be written off at the end of the DRO term. This means you will no longer owe the debts covered by the DRO.
Implications
While a DRO offers relief from debt, it also has implications on your credit rating. A DRO will be recorded on the Individual Insolvency Register, which is publicly accessible. It may also impact your ability to obtain credit during and after the DRO period.
Exclusions
Some types of debt are not covered by DROs, such as court fines, student loans, child support, and certain types of social fund loans.
Conclusion
It’s important to seek advice from a qualified debt adviser or intermediary before applying for a DRO. They can help you understand whether a DRO is the right option for your situation and guide you through the application process. Keep in mind that financial regulations and procedures may have changed since my last update, so I recommend checking with authoritative sources or debt advice organizations for the most current information.
