What is a Debt Relief Order?

A DRO, or Debt Relief Order as it is commonly known, is an alternative form of Bankruptcy.  When it was launched in April 2009, it was an option aimed primarily at people in debt, on low incomes, who could not otherwise afford the higher costs of Bankruptcy.

It allows people with debts of less than £15,000, who have gross assets not exceeding £300 and a surplus income of no more than £50 per month to be able to get 'rid' of their debts for a low cost fee of £90.

If you owe more than £15,000 and so do not qualify for a Debt Relief Order, you could consider an Individual Voluntary Arrangement IVA.
This is a legal agreement to pay off your debt at a set level for five years.

But with an IVA, interest on your debt is frozen and it's normally possible to negotiate only a percentage of the amount you owe, as creditors will be happy to get something back rather than nothing.

Other Debt Solutions Currently Available in the UK

1. IVA - An Individual Voluntary Arrangement more commonly known as an IVA is a legally binding agreement for the satisfaction of debts usually lasting five years. To enter into an IVA, you would usually have to have at least £15,000 of unsecured debt. It is a genuine method of avoiding bankruptcy while still being subject to a formal insolvency procedure arrangement. Read more about IVAs here
2. Bankruptcy - Bankruptcy can be the best option for dealing with debts in many cases and can allow people to clear all their debts and make a genuine fresh start. You are normally discharged after one year or less in some cases; however you may be subject to an income order for three years depending on your circumstances. If you own your home or have valuable assets both could be at serious risk.
3. Debt Management - Debt Management can seem like an easy way out of temporary financial problems, giving you a lifeline to cover your bills. There’s a down side though that not many consider until they’ve experienced it for themselves such as the procedure not being legally binding. Read more about Debt Management Plans

If you are facing debt difficulties, first find out about your options by calling 0800 074 6918.

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Listed below are some of the frequently asked questions relating to Debt Relief Orders

• Introduction to Debt Relief Orders
• What is a Debt Relief Order?
• What debts can be included in a Debt Relief Order?
• What debts are excluded from a DebtRelief Order?
• Is my Hire Purchase affected by a Debt Relief Order?
• Is my Motability Car Scheme affected by a Debt Relief Order?
• Who can apply for a Debt Relief Order?
• What is a Competent Authority?
• What is an Approved Intermediary?
• What is the cost of a Debt Relief Order?
• Why should I consider a Debt Relief Order rather than Bankruptcy?
• How do I apply for a Debt Relief Order?
• Who decides if my Debt Relief Order is approved?
• What if my circumstances change whilst I am in a Debt Relief Order?
• How will my creditors know I am in a Debt Relief Order?
• What happens to interest and charges if I am in a Debt Relief Order?
• Rent Arrears and Debt Relief Order's
• Will I be allowed a reasonable standard of living?
• Debt Relief Order Case Study 1
• Debt Relief Order Case Study 2
• Debts incurred after the granting of a Debt Relief Order
• What are the restrictions of a Debt Relief Order?
• What happens if you are dishonest before or during a Debt Relief Order?
• How will a Debt Relief Order affect you?
• What debts are not covered by a Debt Relief Order?
• Will a Debt Relief Order (DRO) affect my council tenancy as I am in debt?
• Can I apply to the Police if I have a Debt Relief Order (DRO)?
• Does getting a job after getting a Debt Relief Order (DRO) affect me, because I am seriously in debt?