What-Is-A-Debt-Relief-Order-by-Consumer-Debt-Help

What Is A Debt Relief Order?

What is a Debt Relief Order?

A debt relief order (DRO) is a debt solution for people in England and Wales who have debt problems but very little money left over each month after paying their essential expenses.

If you qualify for a DRO your debts will be frozen for 12 months and you will not have to make any repayments. After 12 months, your debt will be written off (cancelled) if you have not been able to pay it off in full.

A DRO can only be imposed by an authorised debt advisor, such as a debt relief order practitioner and must be approved by the court.

To qualify for a DRO, you must:

  1. Owe less than £20,000
  2. Have less than £50 left over each month after paying your essential expenses
  3. Not own your home
  4. Not have been subject to a debt relief order or bankruptcy order in the last six years
  5. Not have had a DRO application rejected in the last six months

If you do not qualify for a DRO there are other debt solutions available to you. These include debt management plans, individual voluntary arrangements (IVAs) and bankruptcy.

If you think a debt relief order may be the right debt solution for you contact an authorised debt advisor to discuss your options.

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How much debt do you have?

Less than £1,000
£1,000-£5,000
£5,000-£10,000
more than £10,000

How long does a debt relief order last?

Once a DRO has been granted, it lasts for 12 months and during this time the debtor is protected from any further action by their creditors. At the end of the 12 months, the debt is written off and the debtor is released from their obligations.

However, it is important to note that a DRO does not cover all types of debt. Certain debts such as student loans, council tax and maintenance payments are not eligible. In addition, a DRO will not protect the debtor from their mortgage lender taking action to repossess their home.

If you are considering applying for a debt relief order it is important to seek professional advice to ensure that it is the right solution for your circumstances.

How do I apply for a DRO?

If you think you might be eligible for a DRO, you should speak to an authorised debt advisor to get more information and advice. They will be able to tell you whether a DRO is the right debt solution for you, and help you with the application process.

Once you’ve applied for a DRO, an official called an ‘intermediary’ will assess your application. If they think you’re eligible they’ll send your paperwork to the court.

A judge will then decide whether or not to grant you a DRO. If they do, it will last for 12 months and during that time your creditors won’t be able to take any action against you to recover the debt. At the end of the 12 months, the debt will be written off unless you come into some money and are able to repay it.

It’s important to note that a DRO is a serious debt solution and should only be considered as a last resort. If you’re granted a DRO, it will have a major impact on your credit rating and make it very difficult to get credit in the future. You should always speak to an authorised debt advisor before making any decisions about your debt

What are the negatives?

There are a few downsides to consider before applying for a DRO:

  • It will affect your credit rating. A DRO will stay on your credit file for six years which can make it difficult getting credit in the future.
  • You might have to give up some of your possessions. If you have any valuable assets, such as a car or property, you can be required to sell them to pay off your debts.
  • You ca only use a DRO once. If you find yourself in debt again in the future you won’t be able to use a DRO to help sort things out.
  • You might still owe money after a DRO has been completed. Some types of debt, such as student loans and child support payments, can’t be included in a DRO. You’ll still be responsible for making these payments.

Applying for a debt relief order is a big decision. Make sure you understand all of the potential downsides before you take any action.

Debt Relief Order or IVA?

There’s no easy answer to the question of whether a debt relief order (DRO) or an individual voluntary arrangement (IVA) is better. It depends on your individual circumstances.

Both DROs and IVAs are debt solutions that can help you get your finances back on track. They both have their pros and cons, so it’s important to weigh up all the options before making a decision.

Here are some things to consider when deciding whether a DRO or an IVA is right for you:

  1. How much debt do you have? A DRO may be suitable if you owe less than £20,000 while an IVA is normally more appropriate if you owe more than this.
  2. What kind of debt do you have? A DRO can only be used to resolve certain types of debt such as credit card debt and personal loans. An IVA, on the other hand, can be used to resolve a wider range of debts including business debt.
  3. How much can you afford to pay back each month? With a DRO you don’t have to make any monthly repayments. With an IVA you’ll need to agree on a monthly repayment plan to your creditors that you can afford.
  4. What are the consequences of not being able to stick to the repayment plan? If you miss payments on an IVA your creditors may take enforcement action against you which includes seizing your assets or taking you to court. Missing payments on your DRO order can result in revocation, and worsen your debt problems.

Ultimately, the decision of whether to choose a DRO or an IVA should be based on your own individual circumstances. If you’re not sure which debt solution is right for you it’s best to speak to a qualified debt advisor who can help you assess your options.

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