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Who is eligible for a DRO?
Debt relief orders are a debt solution suited to people with little income and few assets. They therefore feature very specific criteria that must be met in order to qualify. These requirements include:
- You must have no more than £50 left over each month after paying your household bills
- You do not own a vehicle worth more than £1,000 (this does not include vehicles adapted for physical disabilities)
- You are not currently subject to any bankruptcy or IVA proceedings nor have had a DRO in the previous 6-years
- You do not own your own home
- Your qualifying debts do not total more than £20,000
- You do not own assets worth more than £1,000 in total
- You have lived or ran a business in England, Wales or Northern Ireland for the last three years
Is a DRO the best option for me?
A debt relief order is the best route for many with extreme debt, however it isn’t suitable for everybody as it only covers certain types and amounts of debt. A DRO can also have a signifcant impact on your credit rating and your lifestyle, so shouldn’t be taken without caution. Depending on your circumstances, there may be other better options. These options include debt consolidation, Individual Voluntary Arrangements (IVAs) and Bankruptcy. Complete our quick online assessment to see which is best for you.Take our quick online test
What debt does a DRO cover?
Debt Relief Orders only cover certain debts and it is therefore important that you learn who is eligible for a DRO. This means that you will still be held responsible for any debts that do not fall under the DRO. It is important that you declare all debts when applying for a DRO. Furthermore, you cannot add a debt once the DRO has started, whilst in some cases if this forgotten debt means your total debt exceeds the £20,000 limit your DRO may be revoked entirely. DROs last on average 1-year – a period known as the moratorium period -during which time you will not be required to make any payments. Your debts will be written off 1-year after your DRO has been approved and provided that your financial situation has not improved during this period. The following types of debts are covered by a DRO:
- Household bills such as rent, gas, electric, telephone and council tax
- Consumer debt such as credit cards, short-term loans, overdrafts, and store cards
- Hire purchase and conditional sale agreements
- Items purchased on finance, including buy-now-pay-later agreements
- Loans from family and friends
What happens at the end of a DRO?
Debt Relief Orders usually last for approximately 1-year. Therefore, after this time, all of your debts covered by the DRO are eliminated and you will no longer be required to pay them – resulting in you becoming debt free. However, even after this period, there are still areas that will be affected for several years after this. This is because a DRO will remain on your financial record for a total of 6-years. Therefore, during this period your credit rating will be severely affected. As a result of this, you will find it difficult to get loans and open bank accounts. As such, it is very important that you take this into account when considering entering a DRO.
What debt does a DRO not cover?
There are some debts that are not covered by a Debt Relief Order. This means that you must continue to pay these regardless of whether you successfully enter a DRO or not. The types of debts excluded from a DRO include:
- Student loans (old and new style)
- Court fines
- Child maintenance / child support agency debts
- Social fund loans
- Criminal fines
- TV license arrears
- Claims against you for damage or personal injury
In addition, debts arising from fraud, such as fraudulent benefits claims, are not written off at the end of the DRO but will count towards the £20,000 limit. What to know more? Find out how a debt relief order could affect your life