A debt relief order or DRO is a low-cost alternative to bankruptcy. It’s a way to have your debts written off if you can’t really afford to pay them.
You must fit certain criteria to qualify and you can only get a DRO through an approved organization such as Step Change Debt Charity. If you qualify our specialist DRO team can apply to the Insolvency Service for you. To qualify for a DRO you must live in England, Wales or Northern Ireland or have run a business in one of these countries within the last three years. You must be unable to pay off your debt. You must a few or no asset and if you own a car it can’t be worth more than a thousand pounds.
To be eligible the total amount you owe must add up to less than twenty thousand pounds. You must have less than 50 pounds left over each month after your essential living costs are covered and you mustn’t own a property such as a house. If these criteria apply to you then a DRO could be a solution to your debt problem. A DRO freezes your debt repayment for 12 months this is called the moratorium period. If your financial situation hasn’t changed by the end of this period then your debts will be written off. As soon as your DRO is approved the creditors included can’t take any action to collect the debt from you and they should also stop asking you for payments.
Although a DRO is a legally binding solution you won’t need to appear in court. As with any debt solution, there are things you should consider before entering into a DRO. You should bear in mind that you have to pay a £90 set up fee to the insolvency service. The DRO will also affect your credit rating for 6 years from the date it is approved. You’re likely to find it harder to get credit within this time.
Should something change during the 12-month moratorium period your DRO may be canceled? This would only happen if you no longer meet the criteria for a DRO such as receiving a significant pay rise or an inheritance. Some debts can’t be included in a DRO, these include court fines, student loans, and child maintenance payments. With any debt solution, it’s important to get debt advice to make sure it’s suitable for you. We offer free debt advice through our debt helpline, alternatively, you can go online and use our debt advice tool Debt Remedy.