FAQs - Debt Relief Order

Debt Relief Order Frequently Asked Questions

Q. What is a Debt Relief Order?

A. Debt Relief Orders, or DROs, were introduced as a new type of debt solution by the Tribunals, Courts and Enforcement Act 2007. They’re only available to people living in England and Wales. DROs are designed to help people deal with their debts who:

  • Owe a total of £15,000 or less
  • Have little or no disposable income and no significant assets that they can use to repay their debts
  • Can’t afford to make themselves bankrupt.

You can read a more detailed overview here - Debt Relief Orders.

Q. Who’s eligible for a Debt Relief Order?

A. A Debt Relief Order isn’t suitable for everyone. To qualify for a DRO, you must meet a set of very strict criteria. These are as follows:

  • You’re unable to pay your debts
  • You owe up to, but no more than, £15,000
  • You don’t own any assets worth more than £300 in total, or a car worth more than £1,000
  • Your disposable income is £50 a month or less
  • You live in England and Wales, or have lived or worked, or had a property, in either country within the last three years
  • You haven’t had a DRO within the last six years
  • You’re not subject to any current formal insolvency procedures at the time of applying for a DRO. These include:
    • Bankruptcy proceedings
    • An Individual Voluntary Arrangement (IVA)
    • A Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU)
    • A Debt Relief Restrictions Order (DRRO) or Debt Relief Restrictions Undertaking (DRRU) – see below
    • An interim order.

Q. Can a Debt Relief Order deal with all my debts?

A.  Just like bankruptcy, a DRO doesn’t cover every type of debt or liability. You’ll still be responsible for paying:

  • Court fines, child maintenance costs and any other family-related costs resulting from a court order
  • Student loans, in line with the terms of your loan agreement
  • Costs arising from a confiscation order made under section 1 of the Drug Trafficking Offences Act 1986 or section 1 of the Criminal Justice (Scotland) Act 1987, or section 71 of the Criminal Justice Act 1988, or under Parts 2, 3 or 4 of the Proceeds of Crime Act 2002
  • Damages awarded against you for negligence, nuisance or breach of a statutory, contractual or other duty
  • Damages awarded under Part 1 of the Consumer Protection Act 1987 relating to someone’s death or personal injury
  • Debts owing to the Department for Work and Pensions for budgeting loans and crisis loans granted from the Social Fund
  • Debts secured against an asset, such as property. Any secured creditors will still be able to pursue you for payment as their rights aren’t affected by the DRO. However, if your total assets are worth more than £300 – as is likely to be the case with property – you can’t apply for a DRO anyway.

Your Debt Release Direct advisor will help you identify which of your debts can and can’t be included in your DRO application.

Q. How can I apply for a Debt Relief Order?

A. You can only apply for a Debt Relief Order through an approved intermediary, who’ll submit your application to the Official Receiver on your behalf. Debts.org.uk is one of just 12 debt management firms currently listed as a competent authority for DROs, so we can help if a DRO is considered to be a suitable option for you.

Q. How much does a DRO cost?

A. The Official Receiver (OR) will only consider your application for a Debt Relief Order if you pay the required fee to the Insolvency Service. At the moment, the fee is £90. It’s non-refundable, so you won’t get the money back if the OR declines your application. That’s why it’s so important for you to complete the DRO application form fully and accurately before sending it to us for submission.

Q. Who’ll deal with my Debt Relief Order?

A. An application for a Debt Relief Order can only be dealt with by an approved intermediary. This is usually an experienced debt advisor who’s been authorised by a competent authority to help and advise people with completing and submitting an application for a DRO. Debts.org.uk is a competent authority, so your application will be handled by one of our friendly and qualified DRO advisors.

Q. Who is the Official Receiver?

A. The Official Receiver (OR) is an officer of the Insolvency Service. An OR is appointed by the Secretary of State and is an officer of the court to which they’re attached. Part of their job is to assess Debt Relief Order applications and manage DROs once they’re in place.

The OR also has several other responsibilities relating to DROs. These are:

  • Looking into your financial circumstances before and during your DRO
  • Notifying your creditors about the DRO and possibly also reporting to the court
  • Reporting any evidence that you’ve committed any crimes in respect of your DRO, or that you’ve acted dishonestly, or that you’re in some way to blame for the DRO.

Q. What am I obliged to do when applying for a Debt Relief Order?

A. You must:  

  • Give the Official Receiver (OR) a complete list of all your assets and full details of your debts, including the names of all your creditors. You’ll provide this information on the DRO online application form.
  • Cooperate with the OR if they ask for information about your financial circumstances so they can consider your application. They may not need to contact you, but you should be ready to provide the information in case they request it.

Q. What are my obligations when my DRO has been approved?

A. If your Debt Relief Order goes ahead, you’ll need to comply with certain rules. These are:

  • Cooperating fully with the Official Receiver (OR) if they ask for additional information about your finances during the DRO
  • Telling the OR if your income goes up or you gain any assets during the DRO. This includes lump sums such as redundancy payments, windfalls such as lottery wins and inheriting money or property from a will
  • Not obtaining credit of £500 or more without first telling the lender about your DRO
  • Not making direct payments to any of the creditors included in your DRO. However, you might want to seek independent advice about certain debts, such as rent arrears.
  • Taking full account of the consequences of leaving out any information required by the OR during the application process or during the DRO itself. If the OR finds out you’ve omitted important information in your DRO application, they may decline it. If the DRO is already in place, it may be cancelled. In either case, you could be left vulnerable to further action by your creditors. And if the OR considers that the information you left out was very serious, you could be charged with a crime and/or be subject to civil actions, such as a Debt Relief Restrictions Order (DRRO). So it’s vital that you’re open and honest in all your dealings with the OR, both before your DRO is set up and once it’s in place.

Q. What happens during a Debt Relief Order?

A. If a Debt Relief Order is made against you, the Official Receiver (OR) will effectively ‘freeze’ all the debts listed within the DRO for a set time, called a moratorium period. This usually, but not always, lasts for 12 months from the date the DRO comes into force. During this time, you’re protected from your creditors and they can’t pursue you for payment or take any legal action against you. If your circumstances haven’t improved by the time the moratorium period comes to an end, the debts listed within the DRO will be written off.

However, if your circumstances do change and you become able to make payments to your creditors, the OR will consider whether or not to terminate the Debt Relief Order. If these changes come about towards the end of the DRO, you may be granted an extension to the moratorium period of up to three months, so you can reach an agreement with your creditors. During this extension, you’ll still have the same legal protection from your creditors and be subject to the same restrictions as for the first 12 months of your DRO (see below).

Q. What happens about creditor payments during the DRO?

A. If your Debt Relief Order is approved, the Official Receiver will contact all the creditors listed in your application form to tell them about the DRO and that they can no longer take any action to recover your debts.

Once the DRO is in place, you’re not allowed to make any payments to creditors for debts that are included in it. However, you might want to seek independent advice about certain debts, such as rent arrears.

If your creditors ask you for payment during the DRO period, simply tell them that you’re subject to a DRO. If they keep contacting you or threaten you with enforcement proceedings, you can contact the DRO unit at the Insolvency Service for help.

Q. What restrictions will a Debt Relief Order place on me?

A. Whilst you’re subject to a Debt Relief Order, you’ll need to comply with certain restrictions. These are:

  • If you want to obtain credit of £500 or more, either by yourself or with someone else, you must tell the lender about your DRO beforehand. This restriction doesn’t just cover borrowing money, but also situations where you obtain credit by acting with the intention of getting it, even though you haven’t entered into a specific agreement to do this. An example situation would be if you ordered goods without asking for credit, but then didn’t pay for them when they arrived.
  • Carry on a business, either directly or directly, under a different name without first revealing to everyone you do business with that your previous business name was subject to a DRO.
  • You’re not allowed, either directly or indirectly, to be involved with promoting, managing or setting up a limited company, and you can’t act as a company director, without the court’s permission.
  • You can’t apply for another DRO until six years have passed from the date your previous DRO ended.

Q. What will happen to my bank or building society account?

A. If your Debt Relief Order goes ahead, your bank or building society account won’t necessarily be frozen, although this will probably happen if you have a debt such as loan or credit card with the same provider. Even if you don’t have any debts with the provider, your account could still be at risk so you may like to open a new account elsewhere.

The rules of a DRO allow you to open a new bank or building society account, but you may need to tell the provider that you have a DRO. It’s then their decision whether or not to accept your application and if they do accept it, whether to apply any restrictions or conditions to using your account.

It may be best to choose a basic account with few facilities, to help avoid any problems. However, if you later want to apply for an overdraft, you must tell your bank or building society about your DRO. And you must be careful not to write any cheques that are likely to be returned.

Q. Will the Official Receiver tell the credit reference agencies about my DRO?

A. The three main credit reference agencies in the UK are Callcredit, Equifax and Experian. These agencies hold credit files, which contain financial information about most adults in the UK. If the Official Receiver accepts your application for a Debt Relief Order, they won’t tell the credit reference agencies about it directly.

Instead, the agencies collect information from a range of public sources. These include:

  • The Insolvency Register
  • Bankruptcy announcements in local newspapers and the London Gazette
  • The Register of County Court Judgements.

So, you can expect your DRO to show up on your credit file sooner or later.

Q. How will a DRO affect my credit rating?

A. Firstly, it’s important to remember that if you’re applying for a DRO, your credit rating may well be damaged already. If you’ve been struggling to pay your debts for a while, any missing payments and other incidents such as County Court Judgements (CCJs) will have been reported on your credit file.

Once your Debt Relief Order has been listed on your credit file, the entry will stay there for at least six years from the DRO’s start date. This applies even if your moratorium period ended early and you told the credit reference agencies about this. After the six years have come to an end, the DRO entry should automatically be removed from your credit file. However, if this doesn’t happen, it’s your responsibility to contact the credit reference agencies and ask for your files to be updated.

Even after the six years has passed, you could still find it more difficult and/or expensive to obtain credit in the future, as a result of your DRO.

You can find more information about credit reference agencies and your credit rating here.

Q. What are Debt Relief Restrictions Orders (DRROs) and Debt Relief Restrictions Undertakings (DRRUs)?

A. The Official Receiver (OR) will look carefully into your financial affairs both before and during your Debt Relief Order. During their investigations, they may apply to the court for a Debt Relief Restrictions Order (DRRO) if they think you’ve acted dishonestly at any stage of your DRO, or that you’re in any other way to blame for the situation you’re in.

If the court makes a DRRO against you, this will last between two and 15 years. The restrictions will be the same as those imposed by the DRO itself (see above).

A Debt Relief Restrictions Undertaking (DRRU) is the same as a DRRO, but doesn’t involve going to court.

Q. What happens if I get into more debt during the DRO?

A. A Debt Relief Order can only deal with the debts that you owed at the time it was set up; in other words, the information included on your initial application form and provided to the Official Receiver during the application process. Once your DRO is in place, you should try to manage your finances more carefully and avoid incurring any more debt.

If you do get any more credit that doesn’t comply with the DRO’s restrictions (see above), the Official Receiver (OR) may terminate your DRO. This could lead to a bankruptcy order being made against you. You could also be prosecuted in court if you didn’t tell the lenders in question that you were subject to a DRO before getting into debt with them.

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