DROs provide debt relief, subject to some restrictions.
They are suitable for people who do not own their own home, have little surplus income, no assets of material value and have less than £20,000 of unsecured debt.
The DRO lasts for a 12 month moratorium period after payment of an application fee of £90 and acceptance by The Insolvency Service. In that time creditors named on the order cannot take any action to recover their money without permission from the court. At the end of the period, if your circumstances have not changed you will be freed from the debts that were included in your order.
DROs do not involve the courts. They are operated by The Insolvency Service in partnership with skilled debt advisers, called approved DRO intermediaries, who will help you apply to The Official Receiver for a DRO to be granted. A local CAB typically is a competent authority with an approved DRO intermediary and the application can be completed on-line. Your DRO will appear on a public register and will remain on your credit file for 6 years.
A DRO is a serious matter, like any insolvency proceeding, and to apply you must meet certain strict conditions:
- You must be unable to pay your debts
- You must owe less than £15,000 to your unsecured creditors
- You can own a car to the value of £1,000 but the total value of other assets must not exceed £300
- After taking away tax, national insurance contributions and normal household expenses, your disposable income must be no more than £50 a month
- You must be living in England or Wales, or at some time in the last 3 years have been living or carrying on business in England or Wales
- You must not have been subject to another DRO within the last 6 years
- You must not be involved in another formal insolvency procedure at the time you apply
- The Insolvency Service recommend in their Guide to Debt Relief Orders (PDF) that you seek debt advice to consider all the alternatives. Some debts are excluded from a DRO (e.g. Student Loans, Court Fines, Child Maintenance).
- Comply with the Official Receiver’s request to give further information about your financial affairs. You should co-operate fully if they ask you for more information
- Inform the Official Receiver of any assets you obtain or increases in your income whilst subject to a DRO, including lump-sum cash payments, windfalls, property and money left to you in a will
- Not obtain credit of £500 or more from anyone without first telling them that a DRO has been made against you;
- Not make payments direct to creditors included in the DRO.
MoneySave is able to assist you in obtaining a bank account if you are subject to a DRO.
Speak to one of MoneySave’s experienced debt advisers to determine the most appropriate debt solution to your circumstances or complete the contact form.