A Debt Relief Order is a very simple and cheap form of insolvency in England, Wales and Northern Ireland.
This article is an in-depth guide, so you can:
- see if you are likely to meet the DRO criteria;
- decide if this is your best option for your financial problems;
- look in detail at what can happen during a DRO and after it ends.
Update – the DRO limits described in this article are the new limits introduced from the end of June 2021.
An overview of DROs
Read What is a Debt Relief Order (DRO)? for an overview of DROs and how they work.
In a Debt Relief Order (DRO):
- you pay one £90 fee at the start;
- you don’t have to make any monthly payments at all;
- your creditors can’t chase you, take you to court or send round bailiffs;
- at the end of a year, your debts are wiped out.
Most types of debts can go into a DRO, including any CCJs and bills such as council tax and utilities. Student loans are the most common exception.
There are strict criteria to be allowed to start a DRO including not owning a house, having less than £20,000 in debts and having very little spare income each month.
Do you qualify for a DRO?
The DRO rules can’t be fudged:
- you can’t choose to leave a debt out of a DRO to get under the £30,000 limit (but this limit may be increased in May 2021);
- you can’t own a house, even if there is no or negative equity in it or if it is not possible to sell it;
- some debts can’t be included in a DRO, see this list.
The hardest rule for most people to understand is that you can’t have a DRO if you have “more than £75 a month spare income“:
- this is the amount of money you have leftover after paying your bills (rent, council tax, utilities, TV license, mobile etc) and your other expenses (groceries, toiletries, clothes and school uniforms, petrol, bus pass etc)
- it doesn’t take into account the payments you are currently making to your debts, because these payments stop in a DRO.
This may be difficult for you to assess – even if you would be paying more than £75 a month to a DMP or IVA, you may still pass the DRO check as the calculations are different.
If your only income is from benefits you will pass this test even if your income sounds high because of disability benefits – this is because for disability benefits you are allowed to include an expense line for “adult care costs” which is how much you are getting in disability benefits. This is sensible – you are getting PIP for example because you have higher than normal expenses.
If you are unsure if you qualify for a DRO, talk to one of the charities that set up most DROs: Citizens Advice or National Debtline on 0808 808 4000 if you prefer to use the phone.
If you don’t meet the DRO criteria, they will be able to help you look at your other options.
Is a DRO your best option?
If your debt problems aren’t likely to be quickly resolved and you meet the DRO criteria, a DRO is almost always better than most other debt solutions:
- It’s better than an IVA or DMP because you don’t have to make any payments and it is over much quicker.
- It’s better than bankruptcy because the fees are much lower and the procedures simpler.
DROs are meant for serious, long-term debt difficulties.
If your debt problems are only temporary – perhaps you expect to get a well-paying job soon – don’t choose a DRO. Instead look at the option of a Debt Management Plan – if you can’t pay much now, you can offer a token £1 a month to each debt until things get better.
And if you expect to get a chunk of money in the next year, a DRO is usually best avoided. See a reader’s question about the timing of a DRO and redundancy for an example.
One alternative that can work well for some people is Full & Final Settlement offers if you could get a lump sum, for example by getting payday loan refunds. If you think this might be a possibility, don’t opt for a DRO, instead start a Debt Management Plan even if you can only make token £1 a month payments. If a few months later you don’t get enough money to make your debts manageable, you can then choose a DRO.
Applying for a DRO and what happens afterwards
Your DRO Adviser is the best person to ask any questions about the application process, but I have gathered together some common ones here:
Some common questions people have about DROs include::
What happens in a DRO
No-one monitors what you spend your money during a DRO. It is very non-intrusive!
But you have to inform the Insolvency Service if your income goes up or you get a lump sum of money. Or there is some significant change in your circumstances.
- What happens if your income goes up? – if your income goes up or you acquire some money – perhaps from an inheritance or a PPI payout – you need to inform the DRO Unit.
- What happens if you move in with a new partner? here your income and expenses may change.
- What happens if you inherit money? You get to keep the money but it’s likely your DRO will be cancelled if you inherit more than £2000. If there isn’t enough money to repay your debts, you should consider “disclaiming” the bequest.
- How a DRO affects refund claims – you should not try to reclaim PPI whilst you are in a DRO. People who have had a large payout have had their DRO revoked.
- Can I give my daughter in a DRO a car? – a reader’s question… I look at the alternatives.
- Your pension and your DRO – you must not take any money out from your pension whilst you are in a DRO.
What happens after a DRO ends?
The debts that were listed in your DRO application are wiped out.
- What happens at the end of a DRO?
- How to improve your credit record after a DRO
- DROs and your credit score – this looks at whether you can ever get a mortgage after a DRO.
Why no-one talks about DROs
You may wonder why you have never heard of a Debt Relief Order. They aren’t complicated, expensive or unusual. There have been 250,000 DROs in the last ten years – more people choose a DRO than bankruptcy!
But no-one makes any money from them. The DRO fee is only £90 and the organisation that sets up your DRO will only get £10 of this. As a result, almost all DROs are set up by charities.
Fee-charging debt management companies and IVA firms are supposed to give people good advice on what their debt options are, but the regulator says this often isn’t happening. If you look at DMP and IVA firms websites and adverts, many of them simply ignore Debt Relief Orders. That doesn’t mean that DROs are a bad option if you have debts – just that they aren’t a profitable option for those firms.
Sylvia says
Dear Sarah! I definitely qualify for a DRO, I have spoken to a debt advisor. I meet all criteria, however I am baffled on a particular thing and didn`t find any information. I have a share in a property overseas (EU), which would cover my debt- around 5K. However it is not easily marketable, as my sibling is the other owner, plus my Grandma, who under the country laws has usurer rights and according to this upon a sale, 20% of the sale price would be for her and the rest would be between me and my sibling. The property has numerous problems on the top of it as some of the plots around it are in a shared ownership and we couldn`t agree with those people for many decades. Can a sale be forced on them just because of me? If it would be a forced sale, I assume it would be for a very low price, which I must avoid at all costs. Do I need to declare such a problematic property or I have to show the legal background to prove what I say? What to do in a situation like this?
Sara (Debt Camel) says
Sorry but you don’t qualify for a DRO because you own a property.
You have to declare the property and that rules you out, it doesn’t matter that it can’t be sold…
How large are your debts? How old are they?
Sylvia says
The debts are 6-8 years old, around 5000 pounds. My husband has around 11000 thousand under his name. He has no assets. Can he apply only himself, because of the property under my name. I inherited from my mum. How is considered the monthly surplus income when you are a married couple in a same household? Is it halved by 50-50?
Sara (Debt Camel) says
Yes your husband could apply for a DRO – your property will not affect that.
When drawing up the income & expenses for someone in a couple, the Joint expenses such as rent, utilities are usually divided according to who has the most income. So if A’s income is twice as much as B, then A is normally expected to pay two thirds of the rent and bills. A DRO adviser will go through this in detail.
Sylvia says
Thank you so much for your answer, I will consider it.
Harry says
Hello Sara,
I am renting a 3 bedroom property even though I am only eligible for a 2 bedroom under Universal Credit. One child is at university whilst the other now works and lives an hour away and often visits. Obviously I would like to live in what has become “my” family home. I have it now on a very good rate as I have been here for 7 years, and most 2 bedroom properties in the area rent for the same or more than the one I am currently in. If I moved to a different local town, the 3 bedroom properties are still more than I am now paying now but it does have some 2 bedroom properties which are less desirable for approximately £250 less per month perhaps even £350. These aren’t the sorts of areas I would feel secure in. Would I be rejected for a DRO because a DRO officer would deem my rent too high as it would be possible to rent more cheaply if I moved to a more undesirable property?
Thank you in advance.
Sara (Debt Camel) says
It is unusual for your choice of where to live to be questioned, but talk to a DRO adviser about this.
After all the child at uni still lives there for more than a third of the year. And moving to a 2 bed locally would not save you money.
Harry says
I appreciate this very much. Thank you.
Ben says
Hi.
I was wondering if there has been any news on the possible increase to the D.R.O?
Thankyou
Ben
Sara (Debt Camel) says
yes – the Insolvency Service is now expected to announce what the changes will be after the May elections and they may be introduced end June-ish.
Jules says
I have contacted Stepchange today and was told that I meet the criteria for a DRO for my old debts of 11K. I am a full time mature student and was fortunate to secure a bursary last year of £1500 – £500 per term – and am worried that if I should secure it again next year this will affect my DRO if I decide to go ahead with it. I presume it is considered an increase in income. I know the bursary is not taken into account as income for benefit payments, would you know if it is treated as income on a DRO? Thank you.
Sara (Debt Camel) says
is this your only income apart from benefits?
Jules says
I have taken out student finance (maintenance loan), I receive child tax credit, child benefit and receive approx. 40% of my rent in housing benefit.
Sara (Debt Camel) says
in that case I think you should be fine – but do explain what will happen to the adviser at StepChange – they need to know your full situation now and what might happen in the next year.
Jules says
Ok brilliant, thanks Sara
Tina says
Hello Sarah ,
I’ve entered the dro 2 months ago.
Everything was fine until yesterday when i’ve received the bad news that my mum had a stroke and she’s in the hospital!
I am planning now to go back to my country as soon as possible!
I don’t know how long I have to stay there, it all depends on my mother’s condition!
I know that I must inform the official receiver of any changes, including a change of address !
I am on universal credit +furlough at the minute but if i go back to my country and if
stay there for more then 2 months i will ptobably lose my universal credit and the furlough !
My question is how this going to affect my DRO?
Sara (Debt Camel) says
Yes you need to tell the OR where you are going. Explain the circumstances, say you don’t expect to be working abroad, but if you earn anything you will inform the OR.
As your income seems likely to fall it can’t harm your DRO.
Talk to your local Citizens Advice about your benefit situation while you are abroad and any concerns about retaining your tenancy.
Tina says
Thanks very much Sarah for your advice, appreciate it
Frank says
Hi Sara,
I’m worried ill be made redundant and am now living abroad..
Can I apply for DRO from outside of the U.K.?
Sara (Debt Camel) says
I agree with this comment made on another page: https://debtcamel.co.uk/proposed-dro-changes/comment-page-1/#comment-418361
Bev says
Hi. I had a DRO in Aug 17 every company satisfied the debts at that date so they all dropped off when the DRO ends. However United Utilities satisfied them a year later Aug 18? So basically the DRO ends Aug 2023 but these two stay on an extra year? Is that correct? As every other company satisfied them on the DRO date? I thought they have to last 6 years as UU debt is then 7 years? Thanks in advance Bev
Sara (Debt Camel) says
UU should have added a default of the start date of your DRO. See https://debtcamel.co.uk/repair-credit-record-dro/. As UU to correct this.
Wendy says
Hi sara
Quick question please….I recently received a letter from Barclay card to say that they were refunding old unfair fees of £115. Letter said it would be coming off old balance which had been sold to Hoist finance uk. This debt was included in my DRO on november 2018 which is now £0 on my credit report and isnt active. I rang them and they said they will write to me again about the matter as there has been other people in my situation. What do you think should happen? Should I receive the amount to me personally or will it just be a write off? Thanks sara for your help. Wendy
Sara (Debt Camel) says
It will probably be a write off I am afraid.
Wendy says
Okay thank you sara for your advise. Wendy
Deb says
Does this order stop a council eviction?
Sara (Debt Camel) says
Is this rent arrears on a council house? do you have a suspended possession order?
jimbob says
Have a DRO. Information received will eventually attain 7k inheritance. Advisers have conflicting views. One says inform IS when it is received as a physical asset. Other says when you know the value. Do you have a definitive answer which is correct
Sara (Debt Camel) says
What matters is the date of death – there is no particular significance about the date the money arrives in your bank account. I would inform them as soon as you are aware of the amount.
jimbob says
What date do the DRO Unit give to the creditors for the revocation. If that is also the date of death it could be very significant. As per article in CAB site. Creditors may start to apply interest from revocation date.
Sara (Debt Camel) says
So far as I know, the revocation date is when the DRO unit makes the decision.
But I suggest you should stop worrying about what happens immediately the DRO is revoked. How much interest is applied is irrelevant, isn’t it? Because you will be looking at bankruptcy, and that will be the same if you owe 10k, 15k or 100k. And you may well find that creditors don’t start to reapply interest at all….
jimbob says
The local council have realised funeral costs have been deducted. They are now saying estate worth between 7.5k and 7.8k. Total debt at point of being frozen being 6.3k. Our home condition has recently become a point of concern with Adult Social services. So my point of thinking was 7.5k less 6.3k leaves 1.2k. Creditors paid and enough to rectify points of concern of Social worker
jimbob says
My other final point would be. If the inheritance was above the debt amount i would be thinking i had a legal requirement to clear the debts in full
Sara (Debt Camel) says
No – you can offer a lower full and final settlement if you want – your creditor doesn’t have to accept it but you can offer one. In this sort of case you can say you inherited X, you have had to spend Y on essentials (list them) so you are offering to divide X – Y between your creditors and if these offers are not accepted you intend to go bankrupt.
What sort of debts are in your DRO? Not all creditors will take a F&F.
jimbob says
A big thank you for the reply. This now makes sense to me. It gives me great clarity that we have a route to becoming Social worker friendly. Debts are. Vanquis CC 3.7K. Barclaycard 800 pound. Capital One 1.2k. Argos Card 220 pound. And Creation { Currys a/c} 410 pound. { Vanquis card was always maxed out but kept offering large increases}
Dave says
Hi, great website, thank you.
I’m a British Citizen residing in a Southeast Asian Country and considering applying fro either DRO or BR. I understand that I must have lived in the UK within the last 3 years to apply for either. My question is, how exactly do they determine where you were ‘living’ – I was always on a tourist visa until January 2019, and also had periods of travelling around between countries prior to then also. If I did apply for BR, would I have to show proof of living in the UK within 3 years? What forms would be accepted?
Also, if I still have available credit now can I utilise this before I filing the application?
Thanks in advance.
Sara (Debt Camel) says
I suggest you talk to National Debtline who you can contact from abroad: https://www.nationaldebtline.org/
Abdul says
Hello,
I have four creditors with different amounts owed, with one as low as £1,500 and another as high as £6,000, with a total debt of around £16,000.
All interest is frozen and I am in correspondence with all my creditors. I am currently working in a low-paid role and am reliant on Universal Credit. I can, however, save some money each month.
Am I allowed to clear the lower amounts ahead of the higher amounts? ie instead of paying each creditor the same percentage, am I able to save for the £1,500 balance, for example, and pay that off first before then aiming to pay the next creditor? Or would this count against me if I enter a DRO or bankruptcy down the line?
My hope is to avoid a DRO or bankruptcy and pay off the debts I owe, hence why I’m exploring the idea of slowly paying creditors off.
Thank you
Sara (Debt Camel) says
How much are you paying in monthly payments at the moment to them in total? Are you paying them all the same amount of dividing the money so the largest gets the most?
Do you expect your situation to improve much over the year or two?
I assume you are renting – do you own a car?
Abdul says
Thank you, Sara.
Not paying anything at the moment and haven’t paid anything for nearly four years as I had serious mental health problems and experienced homelessness. Presented all this to them via a debt advisor and a homelessness charity and everything has been put on hold. I’ve now got myself back up on my feet and have a secure tenancy and a (low-paying) job, and any excess money I make I am saving.
I do expect – though more hope – that my situation will improve slowly in the next 12-24 months, and I am renting and don’t own a car..
I have considered a DRO and bankruptcy – your guides here invaluable, and thank you – but I also hope to maybe pay these debts off one day (I feel I may be too honest/naive/idealistic). I appreciate the six year limit is approaching and debts could be considered statute-barred, but I also feel that having gone through an advisor and asking for assistance has somehow acknowledged the debt, so the six year limit could have been reset and I don’t want to count on it as I stll have hopes of paying.. but I am also realistic and will seek help from an advisor if I need..
Abdul
Sara (Debt Camel) says
It’s good you are now in a much better position.
But really with a secure tenancy this is the time to clear out the debt and get a fresh start. If you are on UC I doubt you can be abl;e to save more than £75 a month – that would just take way too long to clear that mountain. Also if you were homeless and the tenancy is pretty new, you probably need to keep buying the odd thing for the house – it’s good for your mental health to be able to do that and not worry about how much you have saved up to try to pay off this debt.
If you earn more your UC drops.
I doubt that many of the debts will go statute barred. It happens less often now. IF you wait another year or two then are contacted and opt for DRO then, you have just delayed getting clear of the debts.
So I suggest you do yourself a big favour and talk to National Debtline now about a DRO.
Abdul says
Sure. Will do that and ask their advice and next steps. The ‘fresh start’ idea sounds appealing, and will no doubt provide a boost mental health-wise. Thank you!
Regards,
Abdul
Abdul says
Hello again,
When submitting an income and expenditure sheet, what costs are allowed to go on there? I ask because the range of spreadsheets out there differ, with some specifying more than others, and some with just ‘other’.
Are items such as cigarettes, clothing, gifts for birthdays/xmas, days out etc. allowable? Or would an Official Receiver consider these frivolous? I have an impression that the OR would suggest cutting down on such activities to allow debts to be repaid..
Thank you,
Abdul
Sara (Debt Camel) says
I suggest you talk to a debt advisor such as National Debtline on 0808 808 4000. They have a budget sheet here https://tools.nationaldebtline.org/yourbudget/, I suggest you start with what you actually spend money on. A lot of people who are on low pay and get UC are very likely to meet the “less then £75 a month spare income” criteria.
Maria says
I am currently up to date with all my credit card payments (only paying the minimum amount) but this leaves me literally nothing left at the end of the month. Should I continue to pay these or stop paying them all? And if I stop paying them and as a result I am left with more than £75 per month in the bank, will that stop me from getting a DRO?
Sara (Debt Camel) says
I think you should talk to National Debtline on 0808 808 4000 about your situation. It is common for people to be paying so much to their debts that they have cut back other expenses to a level that is not sustainable. You can get away with no clothes for a short while but not for the years it takes to clear credit card debt.
If you have too much “spare” for a DRO, then a debt management plan where interest is frozen on the credit cards may be a good option for you. National Debtline can talk through the pros and cons of this.
Dawny says
I do not think a DRO is suitable for me, in fact I do not know what is suitable for me. i ran up a lot of debit prior to 2016. In 2016 I finally added up all my debt and it came to over £18,000. I tried just to pay it off but it went down so slowly and made me depressed. I then rang all the people I owed money to and three of the lenders put me on a payment plan with no interest. Another one reduced the interest considerably and gave me a refund of interest from when I had contacted them to ask for help (£250) which considerably reduced the amount I owed them. I have paid off all my overdraft during COVID, and I managed to snowball some credit cards especially the ones I owed a small amount to – I paid three credits cards off. Instead of 10 creditors I now have just 6. I have now added up what I owe and next month it will be below £10,000. I have tried to work out when they will be paid off and it looks like 2024. Do I continue paying off my bills like I am doing – out of 6 creditors – 4 have no interest and a payment plan. One I am throwing all spare money at and the other seems to be coming down each money slowly. I now have nearly £2000 in savings as well which I do not want to touch as it is for emergencies and so that I do not have to take out credit again. Shall I continue as I am until 2024 or should take out a CRO? I work full time and have about £250 left each month after paying my bills and groceries etc.,
Sara (Debt Camel) says
If you will be debt free in 2024 then you don’t need a DRO so it’s best to carry on.
A series of payment arrangements can work well, it’s like a Debt Management Plan. Who are the two creditors who haven’t frozen interest?
Dawny says
tesco credit card and a company called Clockwise – however it is manageable – I just have moments I feel so down about the debit. I try to stay positive and can see progress. It also knowing I am not the only person in this situation.
Sara (Debt Camel) says
I suggest you read https://debtcamel.co.uk/creditor-wont-freeze-interest/ and send them both a complaint about not freezing interest. List all your other creditors who have frozen interest and say how their refusal is prolonging the time you are in problem debt.
Sam says
My DRO was discharged 1st October 2021. I’ve just checked my credit report and all my debts are still showing as open with the full amount still owed. I had 5 creditors totalling around £19000. It’s showing that I’ve defaulted every month since 1st Oct 2020 to present but should this not have stopped?
Sara (Debt Camel) says
This is still pretty recent. Most creditors only update the credit reference agencies once a month. I suggest you wait until January and if your credit reports at that point do not have all the debts marked as satisfied or partially satisfied AND have a default date on or before the date your DRO started, then complain to the creditors. See https://debtcamel.co.uk/repair-credit-record-dro/ for more about this.
Kai says
Hi Sarah
I applied for a DRO July 2020, which was successfully discharged July 2021. I’ve been checking my credit report regularly and have noticed that one of the creditors Three Mobile is still on there. I’ve contacted Three and all they keep saying is that if I want to make payment to clear the balance I can. What can I do about this?
Also I had a Credit Union loan which was part of the DRO. I know that the CU were upset that I applied for a DRO and felt their loan should have been excluded. Recently I set up a standing order to save and noticed that it was being used to pay back the loan first. Which I was fine with (feel guilty that CU money are peoples savings and not like a bank) but they won’t update the info on my credit report to reflect that payments are being made and the balance has reduced. What can I do?
Any advice would be greatly appreciated.
Sara (Debt Camel) says
See https://debtcamel.co.uk/repair-credit-record-dro/ which looks at how to get Three to correct your credit record.
Re the credit Union – they should not be doing this, the debt no longer legally exists. There is no rule which says Credit Unions are nice people and you should repay them afterwards. I suggest you complain and ask for a refund as well as for them to correct your credit record to show that a xero balance is owed. Take your complaint to the Finacial Ombudsman if they refuse.
Kai says
Thanks Sarah.
Re: Credit Union, do you mean a refund of my standing order payments they’ve applied to the loan balance after the the DRO ended. I’m just wondering would they even refund me after I agreed it can be used towards the loan balance. After the DRO ended I wanted to check my savings balance and found my account suspended. They said the only way for the suspension to be lifted is by paying off the loan balance. That’s the only reason why I agreed.
Sara (Debt Camel) says
How large is the loan balance? And the savings balance?
Kai says
Hi Sarah
My loan balance at the time of the DRO was £1744. I have savings of £911 which was offset against the loan balance. They also took a final payment of £128 which I couldn’t cancel (salary deduction) at the time the DRO was granted.
The loan balance was then £722.75.
I have since saved £240 with the CU since the DRO ended. But this has been all applied to the loan balance, which now stands at £482.75.
They’ve also added a fee of £100 as the account was on hold but said they can look at waiving this.
Sara (Debt Camel) says
This sounds completely wrong. Send them a complaint in writing saying that after the DRO year ended , you no longer owe this money so they should not take the amount you are currently trying to save to pay it off.
Ask for them to close the loan and move the payments you have made since your DRO ended to a savings account. Send the complaint to the Financial Ombudsman if they refuse, this is easy to do see https://help.financial-ombudsman.org.uk/help
Also i suggest you stop saving with them until this is sorted out! Do you have another savings account?
Kai says
Thank you. I am going to do as you suggested. I have since opened a new savings account with another CU. I only wanted to maintain a relationship with this one as my employer does salary savings scheme with them so it made sense that money was taken straight away when I got paid.
David Holler says
Hi Sarah,
I was approved DRO few months ago including all my debts at sum £21000 and now I have been contacted by one charity who helped me to pay outstanding balance on my rent sometimes in May this year, now they offered £500 to pay me because of shortage on my Universal Credit between September and December 2021(£20 per week,all together £500)
Do I need to tell this to DRO officer?
Thank you for your help.
Kind regards,
David
Sara (Debt Camel) says
Yes, you should do. I don’t think this will be a problem, but it is likely you should inform the insolvency Service what has happened – the adviser that set up your DRO will know the details of your case and can advise.
Natasha says
Hi Sarah,
March will be my second year completed IVA. I am also going to be going on maternity leave for a year with statutory maternity pay (90% for 6 weeks then approx £150 per week for 33 weeks). My IVA is £324 per month and am really stressed that after the 9 month break I won’t be able to cover the payment’s. I have no assets, and ready worried about paying bills etc whilst off. Are there any other options?
Thank you
Sara (Debt Camel) says
How is paying the £324 going at the moment?
Is this your first child? Do you have the basics for when you baby arrives?
Do you have a partner?
You are renting? Don’t own a car worth over 2k?
Have you looked at what your finances will be like when you go back to work, factoring in child care costs
Sara (Debt Camel) says
I am asking all these questions to get a better idea if a DRO is a possible option for you.