What-is-a-Debt-Relief-Order-Consumer-Debt-Help

What is a Debt Relief Order?

In this article we explore everything you need to know about Debt Relief Orders, a.k.a DRO’s.

What Is A DRO?

A debt solution establishment by submitting an application through a recognized middleman is referred to as a DRO.

It is designed for those on low-income or with little assets who would otherwise be unable to pay the bankruptcy expenses.

An Overview of Debt Relief Orders

A Debt Relief Order (DRO) is a method of resolving your debts if you are unable to do so. It means you don’t have to pay certain types of debt for a fixed length of time (usually 12 months).

The debts included in it will be erased (‘discharged’) at the conclusion of the DRO period, and you won’t have to pay them.

If you obtained any of your debts as a result of fraud, you’ll have to resume paying them after the DRO has ended.

If your circumstances change and you are able to pay some or all of your debts, your DRO may be canceled so you can negotiate payment with your creditors (the individuals or firms you owe money to).

How A DRO Works

Your earnings, debts, and assets will be examined by a DRO advisor.

To apply for a Debt Relief Order, you must owe under £30,000 and have assets worth no more than £2,000. This limit is adjustable depending on the circumstances. Certain debts and possessions are exempt; check your situation before making a selection.

Before you submit your application to the Insolvency Service, you’ll need to pay a £90 fee.

If the application is accepted, you will begin your 12-month DRO period. You are not required to make any payments during this time. The creditors are unable to take any action against you.

At the conclusion of the DRO period, all debts included in the DRO are erased.

Only available in England and Wales.

How to Apply for a DRO

Only an ‘approved intermediary’ can apply for a DRO on your behalf. This is a licensed debt counselor who will take the initiative to complete the paperwork on your behalf.

The application is sent to a bankruptcy court official receiver. This is a bankruptcy court officer who will rule on whether a DRO should be approved.

Eligibility For Getting a Debt Relief Order

To be eligible for a DRO, you must meet these criteria:

  • If you have less than £75 to spend each month after taxes, national insurance and typical home expenditures are paid
  • Lived or worked in England or Wales in the last 3 years
  • Not had a DRO in the last 6 years
  • Owe £30,000 or less
  • Assets worth no more than £2,000 in total

If you are in bankruptcy, or any other formal insolvency procedure, you will not be eligible. However, if one of your creditors has requested a court to declare you bankrupt, you may seek permission from the creditor to apply for a DRO instead.

The Debt Relief Order Application Process

You can’t apply for a DRO on your own; you must hire an authorized debt counselor to handle it for you. Find a Debt Consultant.

In some situations, the official receiver will request your bankruptcy application from you directly. It is important for you to know that the process may not be quick or easy. You’ll need to fill out an application form with all of the necessary information and submit it to a debt counsellor.

During the last 2 years, if you have:

  • Given or sold away any of your belongings/ assets for less than they were worth.
  • Paid some creditors but not others

You will have to inform the official receiver.

It’s possible that your application may be rejected as a consequence of the above.

How Much Does a Debt Relief Order Cost?

The official receiver’s fee is £90. This must be paid at the time of filing and will not be refunded even if you are not granted a DRO.

You must pay the fee in cash. Some individuals are able to get a charity to cover their cost – your debt advisor can explain this to you in further detail.

How Long Does a DRO Last?

Due to the complexity of this question, we’ve written a specific article on How Long Does a DRO last. You can read it here.

If Your Debt Relief Order Gets Granted

The DRO should last for approximately 12 months. The official receiver will:

  • Tell all of your creditors in the DRO that you’ve notified them and that they can’t ask you to repay your debt to them.
  • Inform you that the DRO has been made and explain the restrictions and duties that it imposes on yourself.

You are not allowed to pay anything related to the debts listed in your DRO. If a creditor requests payment, you must inform them about the DRO. They are not able to pursue you for debts owing under a DRO during the moratorium, but they can send you statements or a default notice.

During your DRO period, you must notify the official receiver of any money or assets you receive, as well as any increase in regular income. If you are able to begin paying off your debts, the DRO may be terminated.

The Individual Insolvency Register is updated to include your DRO – it’s removed 3 months after the DRO expires.

Debts You Still Have To Pay When On A Debt Relief Order

Some debts will not be covered by a DRO, and therefore, you will still be required to repay them.

These are:

  • Crisis loans from the Social Fund
  • Unpaid TV licence fees
  • Debts secured against an asset you own
  • Fines for drug offences
  • Damages or fines a court has ordered you to pay
  • Student loans
  • Any debts incurred after the DRO is granted
  • Anything you owe under family proceedings e.g. Chile maintenance.

If you incur new obligations after the DRO is granted, you might be penalised with:

  • If you incurred a debt without notifying the lender about your DRO, you may face prosecution.
  • A bankruptcy order

You must also continue to pay your regular obligations, such as rent and utility payments.

The Restrictions and Limitations of a Debt Relief Order

You’ll have to follow certain “restrictions” while your DRO is in place. This means you can’t:

  • Manage a business with a different name without informing anyone you do business with about your DRO.
  • Write cheques that have a high chance of bouncing back.
  • Act as a director of a company.
  • Create, manage or promote a company without the court’s permission.
  • Request an overdraft without informing your bank or building society about your DRO.
  • Borrow more than £500 without informing the lender about your DRO – regardless if you’re borrowing with someone else or on your own.

It’s a crime to violate the regulations; you may be fined or imprisoned if you do so.

If you apply for a new account with a bank or building society, they may ask you to disclose your DRO. They then have the authority to deny your application or impose conditions and limitations on it.

You must wait at least six years after your DRO was approved before reapplying.

What Happens When Your Debt Relief Order Has Ended?

At the end of your DRO, the scheduled qualifying debts listed in it will be discharged and you won’t have to pay them.

If you obtained any of your debts as a result of fraud, you must resume paying them when the DRO has concluded.

You may view the end date of your DRO on the Individual Insolvency Register website.

Keep your order paperwork after your DRO (moratorium period) has ended.

It’s possible that you’ll need to show proof of your DRO order, especially if you’re attempting to improve your credit history or get credit. Anyone may request evidence of your DRO.

Talk to us at Consumer Debt Help if you are considering a Debt Relief Order and we would be more than happy to help.

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