Debt Relief Order (DRO) FAQs
- What is a DRO?
- Am I eligible for a DRO?
- How can I apply for a DRO?
- How much does a DRO cost?
- How does a DRO work?
- What are the drawbacks of a DRO?
- Are there any restrictions with a DRO?
- Which of my debts would a DRO include?
- Why would I consider a DRO instead of bankruptcy?
- I live in Scotland. Could I enter a DRO?
1. What is a DRO?
A. A DRO, or Debt Relief Order, is a type of insolvency designed to help people cope with debts they can't afford to repay, if
they have a low income and limited assets.
For people who want to enter into bankruptcy but can't afford the fees to do so, a DRO is a low-cost alternative that could help them get out of debt.
2. Am I eligible for a DRO?
A. There are several criteria you must meet to enter into a DRO. You could qualify if:
- You have unsecured debts worth less than £15,000 that you can't repay
- You have assets worth no more than a total of £300 (although you can own a car if it's worth less than £1,000)
- You have a monthly disposable income of less than £50 (after essential costs)
- You haven't had a DRO in the last 6 years, and aren't involved in any other type of insolvency at the moment
- You live in England or Wales.
3. How can I apply for a DRO?
A. You can only apply for a DRO through an approved intermediary: an organisation officially authorised to advise and assist people with their DRO
application.
All About Money is an approved intermediary - so if you think a DRO could be the best solution for you, you could give us a call today and discuss your options with one of our professional debt experts.
In most cases, an application for a DRO can be arranged over the telephone with the approved intermediary. They will complete the application on your behalf and send it to you to be signed before it's submitted to the Insolvency Service.
4. How much does a DRO cost?
A. There is an application cost of £90 - which can be paid in instalments if necessary.
5. How does a DRO work?
A. If your DRO application is successful, you'll be granted a 12-month 'moratorium' on your unsecured debt repayments once you've paid your
application fee. This basically means your payments will be 'frozen' for a year - so you won't have to make any payments, or see your debts grow due to
interest or charges, for a year.
If, after 12 months, your situation hasn't improved, all debts included in the DRO will be written off.
Entering into a DRO will also protect you from any legal action from your lenders while your DRO is in force.
6. What are the drawbacks of a DRO?
A. Like all debt solutions, a DRO also comes with some disadvantages.
It is a form of insolvency that will be recorded on the Insolvency Register during the Order period - and for up to 3 months afterwards.
A DRO will also remain on your credit file for 6 years, which may affect your ability to get credit during that time.
7. Are there any restrictions with a DRO?
A. Entering into a DRO can place some restrictions on you during the Order period:
- If you want to borrow £500 or more, you must first tell the lender you're subject to a DRO
- You cannot be involved in any way with a limited company - or be a company director - without the court's permission
- You won't be able to apply for another DRO in the next 6 years.
8. Which of my debts would a DRO include?
A. A DRO can only help you with unsecured debts, e.g. credit cards, store cards, personal loans,
overdrafts, etc. It can't help with secured debts, such
as mortgages, and certain other debts such as student loans and court fines.
Since DROs aren't available to anyone with assets with a net value exceeding £300, you won't even be eligible for one if you have a mortgage.
9. Why would I consider a DRO instead of bankruptcy?
A. If you can't afford to repay your debts, bankruptcy can sometimes be an appropriate solution - but the cost (£700 in total) can make it difficult
if you're seriously struggling with your finances. This is one reason why DROs were introduced: to provide a low-cost approach that gives people access
to the benefits of insolvency.
Also, you won't have to attend court when entering a DRO (as you would if you entered bankruptcy). A DRO can, in most cases, be arranged over the telephone with the help of an approved intermediary.
10. I live in Scotland. Could I enter a DRO?
A. DROs are only available if you live in England or Wales, or if you've been resident or carrying on business there any time in the last 3 years.
If you live in Scotland, however, you could be eligible for the LILA (Low Income, Low Assets) route into bankruptcy: a solution designed exclusively for Scottish residents with unmanageable debts. Again, All About Money could help - you can call 0800 195 2911 with your questions about LILA.
If you have a question about DROs and didn't find the answer on this page, you can speak to one of our experts today on 0800 195 2911.
Speak to an expert debt adviser on:0800 195 2911
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