Debt Relief Order

The debt relief order came into being in the April of 2009 and for those eligable it can be a real lifeline allowing you to clear your debts within 12 months. A debt relief order provides an alternative to more costly forms of insolvency such as an individual voluntary arrangement (IVA) or bankruptcy.

The debt relief order (DRO) was devised as a mechanism for those on low incomes who have no prospect of being able to repay their debts and is a form of insolvency.

A DRO typically runs over a 12 month period after which you will be free of your debts. Crucially, your creditors (people you owe money to) will not be able to persue you for any monies owed during or after this period.

If you are granted the order, then all of your debts covered within it will be eradicated in twelve months, without paying a penny above the £90. Until you read the criteria for qualification, the order may sound very promising, and indeed it can be, but those that are eligible are often in the most difficult of circumstances.

Who Can Apply for a Debt Relief Order?

A debt relief order is for people on low incomes with few assets, and debts they genuinely cannot repay.

• Your debts must not exceed £15,000
• You must have resided or run a business in either England or Wales for at least the previous 3 years
• Your assets must including savings, valuables and pensions must be less than £300, although a car with a value up to £1000 can be included (a higher allowance is granted if the car has been modified due to disability)
• Any surplus / disposable income must total less than £50 per month
• This must be your first debt relief order in 6 years
• You must not have been declared Bankrupt, be in the process of petitioning for bankruptcy, have had creditors apply to make you bankrupt or have been given a bankruptcy restrictions order
• You must not already be subject to, or in the process of applying for an Individual Voluntary Arrangement (IVA)
• You must be genuinely incapable of paying your debts

In short, you cannot use a debt relief order if you have assets or debts above a certain amount or are already involved in or are using another form of insolvency.

What Does this Mean?

You can see, quite clearly that the DRO is aimed at those with low incomes. During the course of the order, a period of 12 months, the debtor will not be required to make payments on any of the debts covered in the order. Provided the debtor’s circumstances have not improved, their debts will be written off when the 12 month period comes to an end.

The DRO will be filed in the insolvency register and credit agencies will be permitted to access this information.

What Kind of Debt is Covered by a Debt Relief Order?

A DRO covers most types of debt, a noteable exception being Student Loans which are excempt from all forms of insolvency. The type of debts that a debt relief order does apply to include:

• Loans
• Overdrafts
• Credit Cards
• Store Cards
• Conditional Sale Agreements (you may have to return the goods purchased)
• Buy Now Pay Later
• Hire Purchase (you may have to return the goods purchased)
• Domestic rent and utility bills (gas, electricity, water, telephone)
• Over payment of benefits or social allowances which you have been asked to repay

How to Apply for a DRO

The debt relief order is applied for online and will not be required to go through the court process. An intermediary, preferably your debt advisor / insolvency practicioner will do this on your behalf and if your claim appears to suitably match all the required criteria, an official receiver will set the order in motion.

At time of writing a debt relief order costs £90 which can be paid in installments over 6 months.

What if you do not Qualify for a Debt Relief Order?

It is not unfair to say that the DRO is only available to a select few that meet the required qualifications. It is for those people that are struggling the most financially. For this reason, most people simply will not meet the criteria for a debt relief order, and will have to look at other forms of insovency like an Individual Volutnary Arrangement (IVA), Bankruptcy or some other form of Debt Management or Debt Consolidation. Advice on all of these processes can be found on this website.

If you would like to receive free professional debt advice then please do not hesitate to contact us using the form or the phone number above.