Who-Can-Apply-For-A-Debt-Relief-Order-Consumer-Debt-Help

Who Can Apply For A Debt Relief Order

In simple terms, a debt relief order is a way of dealing with your debts if you can’t afford to pay them. It’s also known as a DRO, so you may come across this if you are seeking help to pay off your debts. Essentially, a DRO means you don’t have to pay certain kinds of debt for a specific amount of time. At the end of that period, the debts in the DRO are written off. But who can apply for a debt relief order and is it the right option for you?

Table of contents:

    Who Can Apply For A Debt Relief Order

    A debt relief order only includes certain kinds of debt, which means that not everyone can apply for it.  The first thing to do is to check if this fits your situation.

    So who can apply for a debt relief order? To start with, you will need to apply for a DRO through an ‘approved intermediary’, otherwise known as a debt adviser. There are many places you can find a debt adviser, including several charities who offer free advice.  In order to apply for a DRO, you need to meet the criteria below;

    • you owe £30,000 or less
    • after paying tax, national insurance and household expenses, you have less than £75 to spend each month
    • you’ve lived or worked in England or Wales in the last 3 years
    • your assets aren’t worth more than £2,000 in total

    With this in mind, it’s not possible to apply for a DRO if you’re in the middle of another formal procedure, such as bankruptcy or insolvency. However, if one of your creditors asks a court to make you bankrupt, you can ask for permission to apply for a DRO instead. You can’t do both at the same time.

    Who Is A Debt Relief Order For

    Ideally, a debt relief order will give you some relief and breathing space if you are facing extreme debt and you’re unable to pay it back. As a legal procedure, it can have a significant impact on your credit rating, so you shouldn’t take this route lightly and must consider all your options.

    It might not be a suitable idea for everyone, although it can help people facing significant problems with debt.

    What Happens Next

    Even if you choose to apply for a DRO, it still needs approval before taking place. The next step is to send your application off to the official receiver who is an officer of the bankruptcy court.

    They will look through your application and your financial affairs to decide if you can get a DRO.

    What Debt Can Be Included In A DRO?

    Now you know who can apply for a debt relief order, it’s important to realise that not all debts can go in a DRO.  The following debts are ‘qualifying debts’ which can be part of your debt relief order.

    They include:

    • credit cards, overdrafts and loans
    • arrears with rent, utility bills, telephone bills, council tax and income tax
    • benefits overpayments
    • hire purchase agreements
    • buy now – pay later agreements
    • debts you owe to friends and family
    • business debts
    • solicitor bills

    What Debts Are Not Included

    Meanwhile, there are debts which cannot be part of a DRO, such as the following;

    • child maintenance, or anything you owe under family proceedings
    • student loans
    • budgeting and crisis loans
    • debts against an asset you own
    • fines for drug offences
    • damages or fines a court order says you must pay
    • unpaid TV licence fees
    • any debts you incur after the DRO is in place

    With this in mind, if you’re unsure on whether a particular debt is in or out of the DRO, you can check with your debt adviser.

    How Long Does A DRO Last?

    Typically, a debt relief order lasts for 12 months. During this time, your creditors cannot take action to recover any debts included in your DRO. They may still contact you to tell you how much you owe, but they can’t demand payment.

    Over the course of the year, you will still need to pay off any debts not included in the DRO, as well as your current household bills and living costs. At the end of the 12 months, the debts included are written off, if your financial situation is still the same.

    What Happens At The End Of A DRO

    There are situations where you may still be in difficulty at the end of a DRO. If this is the case, it is possible to get the DRO term extended. Or you could apply for another one. However, you can’t have more than two debt relief orders in a 6 year period.

    Sometimes your financial circumstances may change during the time period of a DRO. Perhaps your income improves, or you receive some assets or a lump sum. And if that happens, you need to inform the official receiver as soon as possible, because DRO’s are for people with few or no assets.

    Terms And Conditions

    To ensure you are compliant with your DRO terms, you will have to face some restrictions. These include;

    • you can’t borrow more than £500 without telling the lender about your DRO
    • as well as this, you can’t act as a director of a company
    • furthermore, you won’t be able to create, manage or promote a company without the court’s permission
    • you can’t manage a business with a different name without telling anyone you do business with about your DRO
    • nor apply for an overdraft without telling your bank or building society about your DRO
    • finally, you can’t write cheques that are likely to bounce

    Bear in mind that it’s illegal to break any of these restrictions. If you do, you could face prosecution.

    Is A DRO Right For Me

    To conclude, now you know who can apply for a debt relief order and how to apply, but is it the right option for you? A DRO is mainly for people who are in extreme debt and have difficulty paying anything back. If this is you, there may still be other options available to you aside from a debt relief order. For example, you could apply for a debt management plan.

    Importantly, the first thing to do is to speak to a debt adviser for free who can talk to you about different ways of clearing debt. Also, remember you are not alone. Thousands of people in the UK seek help for debt every year and need support to find a way through.

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