Debt Relief Order
A Debt Relief Order (DRO) is a method of debt relief for those that have a relatively small amount of debt and very few assets. A DRO is a low-cost alternative to bankruptcy — it costs £90 to apply for a debt relief order.
Criteria For A Debt-management Plan
There isn’t a set amount of debt needed to enter into a debt-management plan, but there are a few things that should be considered first.
A DMP is great for those struggling to keep up with debt repayments but who can afford to consistently pay smaller amounts each month over a longer period. Before entering into a DMP, always ensure that you will still be able to comfortably pay priority bills such as your mortgage/rent and council tax. It’s also great for those whose financial situation is likely to improve over time and those who have a reliable and steady income.
What Are The Criteria For A Debt Relief Order?
England and Wales
- You are unable to pay the debts you owe.
- You have £75 or less spare income each month (after normal household expenses).
- You must owe less than £30 000.
- You must not be a homeowner.
- You have less than £2 000 worth of assets (this excludes a car which you also own, if its value is less than £2 000).
- You have not had a DRO in the past six years and are not in another formal insolvency procedure.
- You have lived or worked in England and Wales within the past three years.
Northern Ireland
- You are unable to pay the debts you owe.
- You have £50 or less spare income each month (after normal household expenses).
- You must owe less than £20 000.
- You must not be a homeowner.
- You have less than £1 000 worth of assets (this excludes a car which you also own, if its value is less than £1 000).
- You have not had a DRO in the past six years and are not in another formal insolvency procedure.
- You are currently living in or have lived or worked in Northern Ireland within the past three years.
Debt Relief Order Is It Right For Me?
As with all debt solutions, it is important to understand both the advantages and disadvantages of applying for a debt relief order.
Advantages of a Debt Relief Order
- The fee for a DRO is £90 and can be paid in instalments.
- A DRO lasts for 12 months, so it can be a quicker way of becoming debt-free.
- You are not required to make any contributions during that time.
- Interest and charges are frozen.
- You will keep any assets, including your car as long as it is valued at less than;
- £2,000 in England or Wales
- £1,000 in Northern Ireland
Disadvantages of a Debt Relief Order
- The DRO process cannot begin until the fee has been paid in full.
- As a formal arrangement, a DRO must be applied for through an authorised representative.
- You cannot enter into a DRO if you have an existing IVA or bankruptcy order.
- You cannot apply within six years of a previously accepted application.
- If your financial circumstances change within the 12 months, the DRO can be revoked.
- Your details will be added to the Individual Insolvency Register, and the DRO will stay on your credit file for six years.
How Does A Debt Relief Order Work?
A DRO is set up through a DRO advisor and the Insolvency Service. It allows all payments, interest and charges to be frozen for 12 months. Once this process has started, your creditors are no longer allowed to pursue you for payment.
There is a £90 set-up fee, this can be paid gradually, but the process will not start until it has been paid in full. After the 12 months is up, if you are still in a position that means you cannot pay your debts, they will be written off. Don’t forget, your DRO will remain on your credit file for six years.
Which Debts Can be Included in a Det Relief Order?
- Personal loans
- Credit cards
- Rent arrears
- Overdue utility bills
- Tax and National Insurance underpayments
- Overdrafts
- Benefits overpayments
- Telephone and broadband bills
- Council tax
Which Debts Can’t Be Included in a Debt Relief order?
- Court fees or fines
- Student loans
- Social fund loans
- Child maintenance/support
Can I Apply For A Debt-consolidation Loan?
If you have a good credit rating, steady income and can commit to the long-term payments of a debt-consolidation loan, then you can apply for one. However, it is certainly best to seek professional advice before applying, as being refused a loan can negatively affect your credit score.
The process of applying for a debt-consolidation loan is simple (although each loan process will vary). Upon applying for the loan, you may need to provide proof of income, and your credit score will be checked. If you are approved, you will receive the loan and should use this to pay off your existing debt and close your accounts. You will then only have one creditor, which you will repay until your debt is entirely paid off, leaving you debt-free.
It’s always best to seek guidance before you begin the process of debt relief. Why not request a free call-back today, and one of our friendly team can help find the best debt solution for you. You can’t apply for a debt relief order yourself, you must go through a professional DRO advisor or an organisation approved by the Insolvency Service. Money Helpline understands debt and what the Insolvency Service looks for when approving applications, so we can help point you in the right direction for your financial situation.
It takes up to 10 working days for the Insolvency Service to process a DRO application. Once confirmed, the length of the process is dependent on how quickly you provide the requested information that they need to continue. You can’t apply for a debt relief order yourself, you must go through a professional DRO advisor or an organisation approved by the Insolvency Service. Debt Rainbow understands debt and what the Insolvency Service looks for when approving applications, so we can help point you in the right direction for your financial situation.
A DRO will last for around 12 months. As long as your financial situation doesn’t change within this time, your debt will be written off once the DRO ends. If your financial situation improves within the 12 months and you are deemed able to pay your debts, the DRO can be revoked, and you will become liable to pay it back.You can’t apply for a debt relief order yourself, you must go through a professional DRO advisor or an organisation approved by the Insolvency Service. Money Helpline understands debt and what the Insolvency Service looks for when approving applications, so we can help point you in the right direction for your financial situation.