A Debt Relief Order, sometimes called a Debt Release Order, is an alternative to bankruptcy in England and Wales. It was introduced in 2009 to make it quicker and cheaper for people with no assets to clear their debts. You do not have to go to court as a DRO is granted by the Insolvency Service. The fee is £90 and you can pay this in installments over nine months. Bankruptcy costs at least £450 and you must go to court. A Debt Relief Order lasts for one year, during which your creditors are not allowed to pursue you for your debt. If you obey the terms of the DRO for the whole year, your debts will be completely cleared.

Am I eligible for a Debt Relief Order?

Debt Relief Orders are only available to people who meet the following conditions:

  • You must be unable to pay your debts
  • Your debts must be no more than £15,000
  • You must have less than £50 per month of spare income after your normal expenses
  • You must not be a homeowner
  • You must not have assets or savings over £300
  • You must not own a vehicle worth more than £1000

You will not get a Debt relief order if:

  • You are currently bankrupt
  • You have, or are applying for, an Individual Voluntary Arrangement
  • You have applied for bankruptcy
  • You have already been given a DRO in the last  years
  • A court has given you a Bankruptcy Restrictions order or Debt Relief Restriction Order


What counts as an Asset?

You cannot apply for a Debt Relief Order if you have assets (things of value) worth over £300. The following things do not count assets when applying for a DRO:

  • Household goods such as clothing, bedding and furniture
  • Things you need for your job or business like tools or books
  • A car which has been adapted because you are disabled

What debts are included in a Debt Reduction Order?

Only some types of debt can be cleared by a DRO. These include:

  • Rent, council tax, telephone and utilities arrears
  • Hire purchase and buy now - pay later agreements
  • Overdrafts, loans and credit cards
  • Benefit overpayments

Som types of debt cannot be cleared by a DRO. These include:

  • Fines and confiscation orders issued by the Crown Court
  • Child maintenance and child support
  • student loans

How do I apply for a Debt Relief Order?

You need to apply through an approved intermediary. These are debt advisers who the Insolvency Service have permitted to give advice and apply for DROs. The Citizens Advice Bureau have intermediaries available and can be found in your local telephone directory or by contacting your local council. You may have to travel or wait for help from the Citizens Advice Bureau, so alternatively you may wish to contact an Insolvency Practitioner or a Debt Management Company. These are professionals who advise on debts. You can find them advertised online.


What can't I do before applying for a Debt Relief Order?

You must not do the following things before or during a DRO:

  • Destroying, hiding or faking any paperwork, documents or books about your assets or debts
  • Selling or giving things to friends or relatives to reduce your assets
  • Not telling the Receiver if your circumstances change

If you do any of these things you will be committing an offence. You could be refused a Debt Relief order, or even be prosecuted and fined or jailed. It is essential that you do not attempt to hide anything from the Receiver when you apply.


What can't I do during a Debt Relief Order?

While you are bound by the debt order, you will have the following restrictions:

  • You may not get more than £500 in credit without telling the lender about your DRO
  • You may not set up, manage or promote a limited company or be a company director without the permission of the court
  • You may not do business under a different name to the one you used when applying for the DRO without the permission of the court


What must I do during a Debt Relief Order?

Although you will not have to pay off the debts covered by the Debt Relief Order, you will still need to pay your bills like gas, electric, council tax and rent.  If you have any debts not included in the DRO you will still need to make payments. You must tell the Receiver if you realise there was anything wrong or missing on your application, if your income increases or if you come into any money, such as from an inheritance or lottery win. If you do not tell the Receiver about a change in your circumstances, you will be breaking the law and could lose your Debt Relief order or be prosecuted.


What about my credit rating?

Your Debt Relief Order will be on your credit file for six years. This may make it more difficult for you to take out loans, credit cards or hire purchase agreements. If you are able to borrow money or buy goods on credit you are likely to pay a higher interest rate and so the credit will cost you more. You may have problems opening a bank account after a DRO. If this happens you may still be able to open a current account with a Credit Union, which is a not-for-profit organisation that provides financial services.


What are the alternatives?

If you are not eligible for a Debt Relief order, your main alternatives will be an Individual Voluntary Arrangement or bankruptcy. An Individual Voluntary Arrangement means that you will pay off whatever you can afford for up to five years, but will have your debts cleared after that. A bankruptcy will mean that your debts will be completely written off, but the process is difficult and expensive. If you become bankrupt you may lose your house and any non-essential assets and your bankruptcy will be made public. You may be barred from working in some professions if you have been declared bankrupt.