Debt relief orders
What is a Debt Relief Order (DRO)?
A Debt Relief Order (DRO) is a form of debt solution or insolvency which is designed to help people who have relatively low debt, not a great deal of surplus income and few valuable assets.
You must also be without a realistic chance of repaying your debts within a reasonable time.
Advantage of using a DRO
- Available as of April 2009, a DRO will last for 12 months.
- During the 12 months, any creditor named on the order cannot take any action to recover their money unless they have the court’s specific permission to do so.
- When the 12 months are up, the individual will be freed of the debts included in the order (unless their circumstances have significantly improved).
- DROs don`t involve the courts, and are run by The Insolvency Service in partnership with debt advisers.
Disadvantages of using a DRO
- Some debts cannot be included in a DRO such as Magistrates court fines, student loans, and secured debts (debt secured against property).
- DRO’s have similar restrictions to bankruptcy. For example, you would not be able to obtain credit of £500 or more without declaring that you`re subject to a DRO.
- Your employment could be affected.
What are the criteria to qualify for a DRO?
As The Insolvency Service website states, a Debt Relief Order is suitable for people who don`t own their own home – but this isn’t the only condition.
People can only enter a DRO if they meet the following conditions:
- They must be unable to pay their debts.
- They must not owe more than £15,000.
- The total value of their assets must not exceed £300 – although they can own a car worth up to £1,000.
- Their disposable income must not exceed £50 per month.
- They must live in England or Wales – or have lived / carried out business in England Wales at some time in the last 3 years.
- They must not have been subject to another Debt Relief Order in the previous 6 years.
- They must not be involved in another formal insolvency procedure at the time they apply.
