What is a Debt Relief Order (DRO)?
A Debt Relief Order is a personal insolvency solution for individuals with small amounts of debt (under £50,000), minimal disposable income (under £75 per month), and no significant assets, such as a home.
What is the Debt Relief Order process?
The individual will need to make an application to the Insolvency Service and, if successful, creditors can’t pursue the individual to repay their debts. The DRO will usually last a year unless the individual’s situation improves. Once ended, most ‘qualifying debts’ will be written off.
What are 'qualifying debts'?
there are a number of debts classified as qualifying debts, including:
- Credit cards, overdrafts and loans
- Arrears of rent, utility bills, council and income tax
- Buy-now pay later agreements and hire purchase or conditional sale agreements
- Benefits overpayments
- Debts owed to friends or family
- Business debts
However, some debts are non-qualifying, including court fines and confiscation orders, student loans, and child maintenance.
How do I know if a DRO is the right choice?
There are several important factors to consider before applying for a DRO. For instance, there are restrictions during the DRO period, including not being able to borrow £500 without informing the creditor about the DRO, an individual will need permission from the court to become involved in promoting, managing or setting up a limited company or becoming a director, which will apply.
Additionally, a DRO will stay on the individual’s credit record for 6 years.
It is, therefore, important to speak to a DRO specialist to assess the best option. Contact our team today to discuss your situation.
Key Contact
Mark Davies
Partner | Head of Restructuring & Insolvency
Mark is the Head of the Restructuring & Insolvency team and advises Insolvency Practitioners on a national level in relation to insolvency cases. He also advises unsecured creditors in relation to their claims in insolvent estates.
