Debt Relief Orders - DRO
What is a Debt Relief Order?
Debt Relief Orders were introduced on 6th April 2009 to act as an alternative to bankruptcy for people with a moderate level of debt and a minimal disposable income.
They are available to anyone resident in England or Wales with a debt of less than £30,000 and who cannot afford to repay more than £75 per month to their debt.
This differs slightly for residents of Northern Ireland, where their debt must be below £20,000 and affordability must be below £50 per month.
Debt Relief Orders last for 12 months and they remove the obligation from the debtor to make debt repayments.
Once you are subject to a Debt Relief Order you do not make repayments to your debt.
There are some qualifying criteria for the Debt Relief Order, without which an Order cannot be obtained.
- You cannot be a homeowner
- You must have a total debt level below £30,000 if resident in England or Wales
(Or, have a total debt level below £20,000 if resident in Northern Ireland).
- Must have a disposable income of less than £75 per month if resident in England or Wales.
(Or, have a disposable income of less than £50 per month if resident in Northern Ireland)
- You must be unable to repay your debts to the normal schedule.
- Have assets with a total value below £2,000 if resident in England or Wales.
(Or, have assets with a total value below £1000 if resident in Northern Ireland).
- Do not own a vehicle with a value of more than £2,000
- You must be a resident of England, Wales or Northern Ireland, or have had a business here or living here for 3 years.
When it was introduced, the Debt Relief Order was aimed at helping the most financially challenged people in the UK, particularly those unable to afford the £680 cost of making themselves bankrupt.
And whilst the qualifying criteria have been adjusted a couple of times since its introduction in 2009, the DRO remains primarily aimed at those people who have very little asset worth, to whom the cost of bankruptcy is prohibitive.
With a reduced application of £90, the Debt Relief Order still delivers debt freedom after 12 months at a much reduced cost compared to bankrupcy, however, it would be wrong to believe that the DRO comes without any accountability.
Creditors have the same rights of redress as they do under bankruptcy, should they feel a debtor has behaved in a fraudulent manner and there are some restrictions placed on the debtor for the duration of the DRO in line with those found under a Bankruptcy Order
It is also the case that a DRO can be revoked should the debtor's financial circumstances improve during the 12 months of the order. This includes increases in affordibility or receipt of a significant windfall during the DRO term.
When a DRO is revoked, the debtor becomes liable for the original debt once more and is left to seek an alternative solution or arrangement for the repayment of their debts.
There are only a few select intermediaries through which an application for a Debt Relief Order can be made. For further information on applying for a Debt Relief Order contact your local Citizens Advice Bureau.