Debt Relief Orders (DROs)
A Debt Relief Order (DRO) is a formal debt solution designed for people who have low income, few assets and little ability to repay their debts.
A DRO can provide relief from qualifying debts and, if your circumstances do not improve during the DRO period, the debts included are usually written off at the end of the order.
A DRO is a serious financial decision and it is important to understand how it works before applying.
What Is a Debt Relief Order?
A Debt Relief Order is a form of insolvency available to people who cannot afford to repay their debts.
It provides legal protection from creditors for a set period, known as the moratorium period.
During this time:
- Creditors included in the DRO cannot usually take action to recover their debts.
- Payments towards qualifying debts normally stop.
- Interest and charges on included debts are generally frozen.
If your circumstances remain unchanged, the debts covered by the DRO are usually written off at the end of the moratorium period.
Who Might Benefit From A DRO?
A DRO may be suitable if:
- You have unmanageable debt.
- You have little or no disposable income.
- You have few assets.
- You do not own your home.
- Other debt solutions are not suitable.
A debt advisor can help determine whether a DRO is appropriate for your circumstances.
Which Debts Can Be Included?
Many unsecured debts can be included in a DRO, such as:
- Credit cards.
- Personal loans.
- Overdrafts.
- Store cards.
- Catalogue debts.
- Utility arrears.
- Council Tax arrears.
- Benefit overpayments (in certain circumstances).
- Payday loans.
Including a debt means the creditor will generally be bound by the restrictions of the DRO.
Which Debts Cannot Usually Be Included?
Some debts cannot normally be written off through a DRO.
These may include:
- Child maintenance arrears.
- Criminal fines.
- Student loans.
- Court compensation orders.
- Certain debts arising from fraud.
You will usually remain responsible for these debts.
How Do I Apply For A DRO?
You cannot apply for a DRO on your own.
An application must be completed through an approved debt advisor or authorised intermediary.
The advisor will:
- Review your financial circumstances.
- Check whether you meet the eligibility criteria.
- Gather information about your debts.
- Submit the application on your behalf.
It is important to provide accurate and complete information.
What Happens After A DRO Is Approved?
Once approved:
- Your creditors will be notified.
- Included creditors will generally be unable to pursue payment.
- Interest and charges on included debts will usually stop.
- You will not normally make payments towards included debts.
The DRO will remain in place for the moratorium period.
What Is The Moratorium Period?
The moratorium period usually lasts for 12 months.
During this time:
- Your financial circumstances may be reviewed.
- You must report significant changes to your situation.
- Creditors included in the DRO are subject to legal restrictions.
If your circumstances improve significantly, your DRO may be affected.
What Changes Must I Report?
You should report significant changes, such as:
- A substantial increase in income.
- Receiving a lump sum of money.
- Inheriting money or assets.
- Changes in employment.
- Changes to your financial circumstances.
Failure to report relevant changes could affect your DRO.
How Will A DRO Affect My Credit Rating?
A DRO will affect your credit file.
This may make it more difficult to:
- Obtain credit.
- Take out a mortgage.
- Access some financial products.
The record of the DRO will remain on your credit file for a period of time after it has ended.
What Are The Advantages Of A DRO?
A Debt Relief Order may:
✅ Stop creditor action on included debts
✅ Freeze interest and charges
✅ Provide relief from unmanageable debts
✅ Offer a fresh financial start
✅ Avoid the need for ongoing repayments on included debts
✅ Freeze interest and charges
✅ Provide relief from unmanageable debts
✅ Offer a fresh financial start
✅ Avoid the need for ongoing repayments on included debts
For many people on a very low income, a DRO can provide a practical route to becoming debt free.
What Are The Disadvantages Of A DRO?
A DRO can:
❌ Affect your credit rating
❌ Impact access to future borrowing
❌ Require you to report changes in circumstances
❌ Be recorded on public insolvency records
❌ Affect certain financial arrangements
❌ Impact access to future borrowing
❌ Require you to report changes in circumstances
❌ Be recorded on public insolvency records
❌ Affect certain financial arrangements
It is important to understand both the benefits and the consequences before applying.
Are There Alternatives To A DRO?
Depending on your circumstances, alternatives may include:
- Breathing Space.
- Debt Management Plans (DMPs).
- Individual Voluntary Arrangements (IVAs).
- Bankruptcy.
- Informal repayment arrangements.
A debt advisor can help compare all available options and explain which may be most suitable.
Is A DRO Right For Me?
Every situation is different.
A DRO may be suitable if you:
Professional debt advice should always be sought before making a decision.
Need Help?
Our advisors can help you:
- Understand whether a Debt Relief Order is suitable for you.
- Review your income, expenditure and debts.
- Compare all available debt solutions.
- Check your benefit entitlement.
- Access free, confidential debt advice.
Contact our team for free, confidential advice and support.