A Debt Relief Order (DRO) is aimed at people who can’t afford to pay much if anything to their debts, which add up to less than £20,000, and who don’t own a property.
If you meet the criteria so you can have a DRO, it is normally much the best debt option for you unless you expect your situation to improve a lot very soon.
It has been described as “bankruptcy lite” because it gets rid of your debts, costs a lot less in fees (only £90) and is much simpler than bankruptcy.
The DRO criteria
Unlike most of the other debt solutions, you have to be able to meet all of the rules to get a DRO, there isn’t any “wriggle room”. The most important ones are:
- £20,000. You can’t decide to leave out a debt to get under this limit – this is discussed in this article;
- you can’t own a house;
- your assets must have a second-hand value of less than £1,000. That sounds like hardly anything, but ordinary household objects and clothes etc are not counted at all and there is an additional allowance for a car, see below;
- you can’t own a car or motorbike worth more than £1,000 (using Parkers value figures);
- you must have less than £50 a month spare income after paying all your normal bills and expenses. This is complicated, see below for details.
Apart from these main rules, there are some other technical reasons that could stop you getting a DRO, including:
- you can’t have had a DRO within the last 6 years;
- you can’t be a company director;
- you can’t be an undischarged bankrupt or currently in an IVA;
- if you are over 55, you can’t have a large undrawn pension that you could access. (See Pensions and DROs for more details. The person that sets up your DRO will be able to find out whether this will be a problem for you.)
The £50 “spare income” test
You may be unsure about the £50 “spare income” level. The level of spare income will be assessed by the debt advisor that sets up your DRO (see below).
The expenses allowed are not the same as those usually used in an IVA or a DMP!
I have come across people who have had an IVA payment of over £100 proposed who have been “under £50” on the DRO criteria. If all your income comes from benefits or state pension then you will pass this test, so you don’t need to worry that disability benefits such as DLA or PIP will mean that you have too large an income.
Some people who have been struggling with debt repayments find the expenditure allowances surprisingly generous – this may be the first time for many years that you have any money to spend on clothes!
Wiping out your debts – with no payments from you
Debts cleared after a year
In a DRO, your debts are cleared after a “moratorium period” of 12 months. During this year your creditors are not allowed to harass you or take any action to get money from you.
If you have a big change of circumstances during the year (perhaps you get a well-paid job? or inherit a lot of money?) your DRO will be revoked. This is pretty rare, see this article on why and how often this happens.
But not quite all debts
A DRO doesn’t wipe out all kinds of debt. Two that cannot be included in a DRO are:
- student debts; and
- magistrate’s court fines, including TV license fines (but fixed penalty fines such as parking fines and the London Congestion Charge can be included).
See the National Debtline factsheet for a complete list. Any excluded debts are ignored when checking if your total debts are less than £20,000.
No monthly payments during the DRO year
A DRO is designed for people with little or no spare income, therefore you don’t have to make any monthly payments.
This is a major advantage over an IVA, where you have to make payments for five years usually and over a DMP, which could last a very long time if you can only make low payments.
What about my partner?
If you and your partner both have debts and want a DRO then you each have to apply for one – there isn’t any such thing as a joint DRO.
If you have a DRO and your partner doesn’t, then they will become fully responsible for any previously joint debts that you had together. This applies to things like council tax arrears, not just a joint bank loan.
A DRO will not affect the credit rating of anyone living at your house unless you have any joint financial products, such as a joint bank account.
A quarter of a million DROs – but you may not have heard of them!
DROs were introduced in 2008. Ten years later, in November 2018, it was announced that the 250,000th DRO had been set up.
Everyone has heard of bankruptcy, but DROs remain a little known secret.
Mainly because there is no advertising for them. With IVAs, the companies offering them make a lot of money from them so they promote them. No-one makes money from you choosing a DRO, so no-one advertises them.
Who does a DRO suit?
A DRO is frequently the best option for anyone where all or the majority of their income comes from benefits. If you are a pensioner, or have a long-term health condition, then it is a sensible choice. If you have a young family and a low paying job, then it could be many years before you are free of childcare costs, so again a DRO can be a very good choice for you.
If you just have a very temporary money problem then a DRO is unlikely to be your best option. It gets rid of your debts after a year, but it will have a very bad effect on your credit file for six years from when it begins. This is a downside that is well worth paying if you have a larger debt problem, but not for a short-term difficulty.
Think if refunds could resolve your problem:
- If you may have paid PPI on any of your debts, including debts that you have repaid, you should try to reclaim PPI before you start a DRO. You may get so much money back that you can use it settle many of your debts so you won’t need a DRO at all! Some people have had big surprises with the amount of PPI compensation they receive, see How PPI can get you out of debt!
- If you have had problems with payday loans or Provident doorstep loans, you may be able to get a refund of the interest you have paid.
Summary
Pros gets rid of debts when you have little or no money to repay them each month, low-cost, fairly simple
Cons restrictive set of criteria, will affect your credit record for 6 years, may affect your job (very unusual)
Debt Camel says If you owe less than 20k and have no realistic chance of repaying it, a DRO could be an excellent solution for you
How to set up a DRO
You have to apply through an approved debt adviser, called an Approved Intermediary. Debt Camel suggests using Citizens Advice (they set up over 50% of DROs) or National Debtline if you prefer to do this on the phone.
After the debt adviser decides that a DRO is a suitable option for you, you will usually be sent an application pack to complete.
Things to talk to your adviser about include:
- anything you have on Hire Purchase or any unusual debt (not simple credit cards, store cards or loans).
- if you are owed money by someone else or expect to get money in the next year, possibly from benefits backdating.
- what happens to bills such as council tax and utilities if you owe money here and you have a partner.
- If you are concerned about how ‘spare income’ is calculated – people often ask if they can include things like broadband costs and pet food in their expenses – talk to your adviser.
The £20,000 limit is absolute, so to ensure that you will meet this at the time the application is approved your adviser will not put your name forward if your debt is close to the limit, as more interest being added could take you over the top.
Your adviser does almost all the necessary checks before submitting your application. This makes the process of approval very fast:
- there is no court hearing;
- no-one visits your house;
- checks are made on your credit reference file by the Official Receiver – if you appear to have assets or debts that are not listed on your application you will be asked about them. But you won’t be refused a DRO because you live with someone who has assets or a good income.
- DRO applications are usually handled within 2 working days of being submitted;
- more than 98% of DRO applications are approved.
I have collected together some common questions about the application process here:
When your DRO application is approved, you will be sent a letter by the Official Receiver (called the Debtor’s Notice) confirming this and listing the debts which are included in your DRO.
Will debt collectors stop calling after a DRO?
Could you get a payday loan refund?
A guide to Debt Relief Orders
Michael says
I’m in the process of filling out my forms for a DRO but I’ve just received £1000 from a complaint I made a few months back on a guarantor loan. The payment has gone into my bank account that will be part of my DRO, my question is can I take the money out of the account or have I lost the payment?
Sara (Debt Camel) says
so it has just cleared part of an overdraft? are you still using this account?
do you have any rent arrears? or any debts that will not be included in your DRO?
Michael says
That’s right it’s taken £1000 off my overdraft and I am still using the account at the moment. No arrears and the only debt that’s not included is my mobile contract it’s on o2 refresh so the mobile is a loan
Emma says
Hi Sara,
I finished my DRO 2 years ago now!!! But one company is still sending me letters every month saying what my balance is on the account… I have sent them letters as advised on your site and emails and they keep telling me that they cannot close the account and therefore debt even though they were included in the order….
What else can I do??
Sara (Debt Camel) says
Who is this company? Is the debt marked as defaulted on your credit record record with a default date on or before the date of your DRO?
Emma says
Satsuma loans… And no it is still down as open.
There are a few other that are defaulted but the dates are after dro, again I wrote to them but one said thst there was nothing they can do And the others didn’t reply… I had used the template you placed on here
Sara (Debt Camel) says
Have you sent Satsuma a formal complaint? If not, then do so. And send it to the Financial Ombudsman if they refuse to correct this. The most important thing is that there is a default on if before your DRO started, but the balance should also show as zero with the account marked as satisfied or partially satisfied.
Same for the other accounts with defaults later than the start date of your DArAo – although if it’s it’s only a mknth I’d do. You may decide this isn’t worth the hassle.
Emma says
No not yet, can I do this via email? Just I don’t have access to a printer or computer at moment..
The others are all by 1 or 2 months so I’m guessing it doesn’t affect it to much?
Thanks for your help
Sara (Debt Camel) says
fill in their complaint form here: https://www.satsumaloans.co.uk/existing-customers/complaints
If the default dates are out by 1 or 2 months it just delays the time until your credit record is clear by 1 or 2 months. You may think that doesn’t matter much.
Emma says
Sorry forgot to ask what’s the best credit file website to check? When I have checked in past on clear score, and another but can’t remember the name it (think was experian) showed on one everything closed but satsuma and another that there was still 4 open????
Sara (Debt Camel) says
check reports on all three credit reference agencies – there will be a big overlap but it’s the only way to make sure you don’t miss something. See https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to do this for free.
Emma says
Thank you.. Will do this later today and hopefully they take notice this time
Eva says
Hi Sara,
I hope you could help me.
Due to financial situation I’ve stopped paying my loan and credit card in November (total outstanding balance of roughly £10,000). Recently I’ve split up with my husband. He moved out 2 months ago while I and my 1 year old daughter live on the boat.
Because of redundancy I couldn’t come back to work after my maternity leave ended so I am left with no earnings. Since a month Universal Credit and Child Benefit is my only income.
The boat that we live on was bought by my husband 2 years ago, he paid for her but the insurance is on my name.
I believe that DRO may be the best option for me as I cannot see my situation improving any time soon but I am really worry how boat ownership may be seen by DRO officials.
The boat is worth more than £1000 but by selling her to pay my debts I would make myself homeless.
Also the boat really belongs to my husband as he took a loan and bought her but as I figure on insurance policy I am worrying that if I don’t declare the boat as my asset I may commit a fraud.
I am also not sure if I should declare things like generator which I have bought but without it I would be left with no electricity.
I am sorry for a long post and thank you for running this blog as it’s really helpfull and informative!
Eva
Sara (Debt Camel) says
Does your ex think he still owns the boat? So you would not be able to sell it surely?
If he does, then you should certainly tell your DRO adviser about the boat, that your ex owns it but you insure it. I don’t think this will matter – insuring and having use of something is not the same as owning it.
How much did the generator cost? What would its second value be if it was sold? (I am not suggesting you do this.)
Eva says
Thank you for your reply.
He definitely would not allow me to sell her but I was not sure how the law works. He bought the boat while we were still in good relations and living together and also I insured her and currently live ther so I was not sure if either DRO officers may refuse my application because of that or worst scenario bailiffs may request to cover my debts by selling the boat.
Generator is worth probably around £500- £600 if sold second hand.
Sara (Debt Camel) says
It doesn’t sound to me as though you will have any problems because of the boat – it isn’t yours. Or the generator – it’s an essential item for you and it has a value of less than £1000.
I suggest you talk to National Debtline on 0808 808 4000 about your situation, whether a DRO is a good options for you and mention these 2 things.
Eva says
Thank you :)
I will call Debline asap.
Nikki says
I dont know what to do i need to do a dro order but my car was on finance but I payed it of about 4 months ago now everything has changed and its worth about 5000 I need the car to get to and from work both myself and my partner are insured on the car but I owe it we both use it what should I do any help plzz
Sara (Debt Camel) says
have you checked its value on Parkers? Bad condition?
Can you say something about your debts? What sort ? How large? Have you defaulted?
Are you renting privately or social?
Does your partner also have debts?
Nicola says
Me and my husband have a joint account but all of the accounts are in my name with debts on. Will a dro affect his chance of getting a mortgage in the near future? I am out of work (self employed and was on maternity until March) and unable to get benefits so relying on him as we have a little boy so think a dro is the best way forward as I cannot pay anything towards my dmp
Sara (Debt Camel) says
Who is your DMP firm? You could talk to them about getting a DRO.
In a DMP your credit score will already be affected and this will affect Your husbands chance of a mortgage as the joint account means you two are financially linked. Thus will be worse if you gave A DRO.
If your husband wants a mortgage in future you need to stop having a joint bank account now.
Laura says
I pay for a car through a salary sacrifice scheme, I have paid 18 months out of 4 years so far. Is this classed as an asset still even though it is not paid off? I am enquiring due to looking into a debt relief order.
Sara (Debt Camel) says
Most car salary sacrifice schemes are, I think, leasing.
Assuming yours is a lease, then the car is not an asset as you will not own it at the end (correct?)
The debt adviser that sets up your DRO will look into whether you have any better alternatives to this lease. Do you need the car for your job? Would public transport be practical for your job? Would it be cheaper?
Laura says
Thank you, I do need the car, if I was to sell it, it would only just cover what is outstanding. I will own the car after 4 years of paying for it. But like I say I’ve only paid 18 months so I’m a way off now, and is only valued now at £2000
Sara (Debt Camel) says
ok, you do need to talk to a DRO adviser about this as it comes down to the specifics of your case as you have to have a car. If you haven’t yet started talking to a DRO adviser, I suggest you phone National Debtline on 0808 808 4000.
Mimosa says
Hi Sara,
I have a DRO since June 2020. I still receive text messages from one debt agency asking for a payment and asking to call them etc… It is not pleasant, but I don’t care anymore. I have received messages, phone calls, letters from collection agencies during the years, and it does not bother me anymore. Is it ok to ignore them? and not send them the usual letter, telling them not to disturb me and informing them that I have a dro etc…This is 13 year old alleged debt, it is included in the DRO. I just don’t think they deserve the time to not ignore them and go to an explanation mode with them.
Sara (Debt Camel) says
Well it’s up to you. In the time you took to post this comment you could have responded to them and told them about your DRO…
The messages will probably stop soon, see https://debtcamel.co.uk/debts-collectors-dro/. But if you get a letter like the one described here https://debtcamel.co.uk/letter-before-claim-ccj/ don’t ignore it or you will then have a defend a court case – which you would win, but best to avoid the hassle!
Mimosa says
Thanks Sara.
Lauren says
Hi Sara.
I’m currently in an IVA and just found out im being made redundant. I worked 16 hours a week whilst the children went into private childcare. However now I’m not working I will have to take them out. They are only 3 and due to their pre school hours And being a single mother it will be almost impossible to work whilst being a full time mum. Which will mean my Iva will fail. Could I look at getting a DRO once the Iva fails. I do have a car on finance but with not working I won’t be able to keep up the payments. So thinking of selling and settling the finance. It’s valued at 3,000 however there is a lot of damage to it and it’s on its last legs so I don’t suppose it’s worth even £1000 now! I’m just stuck as what’s best to do.
Sara (Debt Camel) says
What did your IVA start?
How large are the debts in your IVA?
I assume you are renting?
The car, it’s normally not possible to sell a car on finance. How much is still owed on it? Do you need a car?
Kirstie says
My income has increased slightly still under the £50 spare income as I need the money for my son he has a health condition. I emailed the DRO unit they said as long as I’m spending the obey I’m okay. They didn’t ask for any of my details to find out who I am. Will. I be okay? Also my UC has risen I understand that I won’t be affected as it’s due to covid. Is this the case? Thanks
Sara (Debt Camel) says
Hi, I replied to your comment on a different page: https://debtcamel.co.uk/dro-applications-faqs/comment-page-5/#comment-381725
Jon says
My DRO has been granted on the 10th June 2020 however I am worried. The person I was living with has decided to leave the house (end September ). Recently I have had to claim universal credit as my work has slowed up and had Covid grant. Some months I got some, some £0 .I am due another grant shortly so £0 UC this month I imagine. I have found place to live cheaper rent plus all utilities etc as before. They won’t change much really but my expenses will go up as I have animals now to look after solely (Dog, Cat, Chickens about a £1 a day for each). I recently lost my driving license for 3 years. I would be distraught if revoked because I am in no position to pay back whatsoever. I would rather stop UC altogether and live like a pauper for the next 9 months to see the DRO go through if that is the best way?
Can you please advise me on what I should do next? Do I have to inform the OR of moving? Do I have to inform the OR of claiming UC (sometimes as not regular as my earnings have been lower) My earnings are very erratic at the moment, August is always terrible month as people are on holiday and with Caronavirus people are tightening their belts and I seem to be one of the first to cancel.
Do I have to contact the OR or could my DRO intermediary do it on my behalf?
Sara (Debt Camel) says
it sounds as though a lot has changed in your life. I think you should go back to your DRO intermediary and ask them to do a new income & expenditure for you so you can show that to the DRO Unit. Many people who work and get UC will meet the DRO criteria but you need your whole situation looked at.
Llauren says
Hi could you tell me please if child maintenance is counted towards income for the £50 spare income? Thank you
Sara (Debt Camel) says
yes it is.
Rickrack says
Hi, I’m seriously considering doing a DRO, however I own a car that is worth more than £1000. My Mum actually bought the car for me a couple of year ago but I’m registered keeper etc. Can I put the car in my Mums name so that it doesn’t show as an asset to me?
Also, I had 2 bank accounts with the same company, one account had an overdraft, that account is now closed and is with debt collection but would be included in the DRO. The other account is the account I get wages paid into and use daily, could this account be affected? Should I open a new account?
My main concern is getting a DRO without losing my car.
Sick of sleepless nights now. To put the car in my Mums name I would also have to tell her about my debt problems which is making my anxiety really bad.
Sara (Debt Camel) says
You can be the registered keeper of a car which is owned by someone else. Perhaps your mum is just letting you use her car, so you couldn’t sell it? Talk to a DRO adviser about this and whether it would need a letter from your mum to confirm it. If it needs a letter, then I am afraid you have to choose between the stress of explaining to your mum and living with the stress of unrepeatable debts.
Rickrack says
Thanks Sara. In regards to the bank accounts could the bank take money from my current account without permission?
Would it be best to open a new bank account and start getting my wage and UC paid into that?
Sara (Debt Camel) says
I normally suggest you open a new bank account with a bank you don’t owe any money to AFTER your DRO is approved. See https://debtcamel.co.uk/bank-accounts-after-bankruptcy/