How will a DRO (Debt Relief Order) affect my credit rating?

If you have considered bankruptcy, but cannot afford the up-front fees (up to £700), a DRO (Debt Relief Order) may be suitable for you.

One downside of a DRO is that it will stay on your credit record for six years. This means that it will be more difficult and/or more expensive to obtain further credit during this time. A DRO affects your credit rating because your unsecured debt is written off - you don't actually repay it at all.

Is a DRO worth it?

A lowered credit rating is certainly a concern, but it's important to remember that if you're struggling to repay your debts, your credit rating will probably have suffered anyway. And if you actually qualify for a DRO, it basically means there's no way forward that won't damage your credit rating.

Despite its downsides, a DRO may therefore still be your most realistic path out of debt.

If you are eligible for a DRO, you will pay an application fee of £90. You will then be given a one-year 'moratorium' on your debts. This means that your debts will not grow due to interest and charges, and you will not have to make any payments towards your unsecured debt. You will also be protected against legal action from your lenders during this time.

After twelve months your situation will be assessed and, if it has not improved sufficiently for you to start making payments again, the debt included in the DRO will be written off.

Who is eligible for a DRO?

To start a DRO, you must fit a specific set of criteria:

• Your unaffordable unsecured debts must not exceed £15,000.
• After essential living costs, your income cannot be more than £50 per month.
• Your total assets cannot be worth more than £300 (with the exception of a car worth under £1,000).
• You must have lived in England, Wales or Northern Ireland (or conducted business there) within the last three years.
• You cannot be involved in any other insolvency proceedings.
• You must not have taken part in a DRO in the past six years.

If you think you are eligible for a DRO, click here to find out more.

Related resources

• Debt Relief Order (DRO) FAQs
• Debt Relief Order Pros and Cons
• What is the difference between a DRO and bankruptcy?
• IVA or DRO?
• Which is right for me: IVA or DRO?
• DRO or bankruptcy?
• How much debt do you need for a DRO?
• What is the difference between a debt management plan & a Debt Relief Order?
• Unemployed and in debt

Tags: debt, debt relief order, bankruptcy, DRO, credit rating, unsecured debt

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