Welcome to the Debt Relief Order Information Centre

Introduction

In April 2009, the Government introduced a new way of dealing with unsecured debts known as a Debt Relief Order or DRO.

This is an alternative to full bankruptcy, but with the same restrictions but at a fraction of the cost. The fee to apply for a Debt Relief Order is £90. The fee must be paid before the Debt Relief Order can be approved. You have a maximum period of 6 months in which to pay this fee.

Debt Relief Orders are available through Competent Authorities who have been authorised to undertake submission of the orders to the Insolvency Service. Each Competent Authority will have Approved Intermediaries who have been authorised to submit the Debt Relief Order application for you.

In order to consider a Debt Relief Order you have to meet certain conditions.

1. Qualifying debts of under £15000
2. Surplus income of no more than £50 per month
3. Assets totalling less than £300, including any pension fund.
4. If you have a vehicle, it should be valued at no more than £1000
5. You must not own or have an interest in a mortgaged or a property that is owned outright.
6. Live in England or Wales or have lived and or carried on a business in England or Wales within the last 3 years.

Qualifying debts are –

• Personal loans, credit cards, overdrafts, store cards or catalogues
• Utility arrears
• Overpayment of benefits, tax credits
• Hire Purchase and Conditional Sale agreements

Non-Qualifying debts are –

• Student Loans
• Court Fines
• Child maintenance payments including debts to Child Support Agency

A Debt Relief Order lasts for 12 months but does not clear your debts until the end of the period. During this time, no further action can be taken against you as continue to meet the Debt Relief Order criteria.

If during the 12 months your situation improves, you need to let the Official Receiver know.

You may be asked to complete a new financial statement and if your surplus income is now in excess of £50 per month, your Debt Relief Order could be revoked and you may become liable to pay the debts again.

If you come into additional funds or inherit assets you must also let the Official Receiver know. He will assess your case and advise what action is necessary.

Like bankruptcy, there are certain restrictions in a Debt Relief Order. These include not obtaining credit of more than £500 without advising the lender that you are subject to a Debt Relief Order and not carrying on any Directorship of a Ltd company without leave of the Court

If you do not adhere to the terms of the Debt Relief Order the Official Receiver can impose a Debt Relief Restriction Order on you, which would lengthen the time that you are restricted on doing certain things. This could be anywhere between 2 and 15 years.

Other ways to deal with debts in the UK

Bankruptcy - is one way of dealing with debts you cannot pay. Bankruptcy proceedings free you from overwhelming debts so you can make a fresh start, subject to some restrictions; and make sure your assets are shared out fairly among your creditors. In England and Wales it costs £475 to go bankrupt. In most cases you will be discharged from bankruptcy within a year and, with a few exceptions, any remaining debts will be written off.

County court administration order - If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. Administration is a court-based procedure whereby you make regular payments to the court to pay towards what you owe your creditors. Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. You do not have to pay a fee for an administration order but the court will take a small percentage from the money you pay towards its costs.

Debt Management - A debt management plan can be used to solve most problems you may have with your unsecured debts. It is an informal arrangement that is suitable if you do not have very significant debts, do not have a very high disposable income, or you expect that your circumstances may change in the near future.The advantages of a debt management plan are you make one affordable payment each month which is distributed to your creditors on a pro-rate basis. A debt management plan is fully flexible and can be changed at any time to suit your changing circumstances and needs. Read more about Debt Management Plans

An Individual Voluntary Arrangement IVA- is a legally binding procedure which allows you to pay off your debts over a number of years. Some of the debt may be written off and you may be able to keep assets like your home. An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and you must be helped by an insolvency practitioner.

Any agreement reached with your creditors will be binding on them. Insolvency practitioners charge fees to set up proposals and monitor the voluntary arrangement.

If you would like more information please contact us Money Advice Direct on  0800 074 6918 or fill in our form by clicking here

If you are unsure as to whether an Debt Relief Order is the best way to solve your debt problems please call us on 0800 074 6918
If you wish to discuss the Debt Relief Order procedure and understand how it can help you please complete the following form or telephone freephone 0800 074 6918.