A Debt Relief Order (DRO) is an agreement designed to help individuals with little to no spare income, who don’t own their home, and have debt of £50,000 or less. It pauses payments on debts for 12 months, after which, if the financial situation hasn’t improved, the debts are written off. DROs are available only in England, Wales, and Northern Ireland.

A DRO freezes debts, including interest and charges, for 12 months. During this period, you do not need to make any payments. If your financial situation hasn’t improved after the year, the debts are written off.

As of April 2024, applying for a DRO is free of charge due to new legislation.

To qualify for a DRO, you must meet the following criteria:

• Live in England, Wales, or Northern Ireland
• Have debts totalling less than £50,000
• Be unable to pay those debts
• Have a disposable income of no more than £75 per month
• Do not own your home
• Do not own a car worth more than £4,000
• Do not own other assets worth more than £2,000
• Have not had a DRO in the last six years
• Are not involved in another formal insolvency procedure at the time of application

Covered debts include:

• Personal loans
• Credit cards
• Rent arrears
• Overdue utility bills
• Tax and National Insurance underpayments
• Overdrafts
• Benefits overpayments
• Telephone and broadband bills
• Council tax

Uncovered debts include:

• Criminal fines
• Student loans
• Social fund loans
• Compensation for a death/injury
• Child maintenance/support

The official review by the Insolvency Service takes up to ten working days. The entire process may take longer depending on how quickly you provide the necessary information.

A DRO typically lasts for 12 months. If your financial situation does not improve during this period, the debts listed in the DRO are written off.

Yes, a DRO will negatively impact your credit rating as it indicates past debt problems. It will remain on your credit file for six years from the commencement date.

Yes, while in a DRO, you cannot:

• Borrow more than £500 without informing the lender about the DRO
• Open a bank account or manage a business without disclosing the DRO
• Act as a director of a limited company

No, you can not have a DRO if you own your home. It is also unlike that you could get a mortgage while in a DRO due to affordability and creditworthiness criteria. Seeking other forms of credit will also be difficult.

A DRO is suitable for those with minimal assets and debt they cannot repay in a reasonable amount of time. It’s beneficial for gaining relief from unmanageable debt, provided you meet the strict eligibility criteria.

Whether a DRO can stop bailiff action depends on what stage of the recovery process the debt has reached. A creditor cannot start bailiff action after the commencement of the DRO. However, if a Controlled Goods Agreement (CGA) has been made then you will have to continue to make the payments, otherwise the bailiff has the right to take the goods away.