Debt Camel

Answers to questions about debts and credit ratings - in plain English!

DRO applications – frequently asked questions

Debt Releief order - signing an application form for a DRO - FAQs - common questions

A Debt Relief Order (DRO)  is often the best debt solution if you have under £20,000 of debt, you are renting and you have hardly any spare money to repay your debts. You don’t have to make any payments in a DRO and, after a year, your debts are wiped out.

You can’t apply for a DRO yourself, the application has to go through a debt adviser who is an Approved  DRO Intermediary. In this article, I just call them your DRO Adviser as it’s shorter! Most DROs are set up by Citizens Advice, but National Debtline, StepChange and Christians Against Poverty also handle a lot. It doesn’t matter who you go through, the DRO you end up with will be the same.

Because you aren’t applying directly, the process may seem a bit confusing. The best answer to every question is ask your DRO Adviser – each firm has their own internal forms and methods. They really want you to get through this process as quickly and easily as possible and the more you understand what is happening, the simpler that is going to be.

But if you are feeling anxious, or you can’t get to talk to your DRO Adviser for a few days, here are some typical questions about DRO applications here.

Questions about eligibility and suitability

I have covered the DRO criteria here – they are fixed numbers, not rough guidelines, and you will have to meet them all. Your DRO Adviser checks this and won’t submit your application if you don’t.

I’m self-employed, I make little money but it’s erratic

You can have a DRO if you are self-employed. Business Debtline are good people to talk to about your situation as a variable income can make it harder to judge.

My bank account often has a lot more than £50 in it so will the Insolvency Service reject a DRO?

This isn’t a problem. Your DRO adviser will do a proper check on your income and expenditure and if they say you meet the “under £50 spare income a month” test, then you are going to be fine.

I have applied for PIP but don’t know if I will get it

Tell your DRO adviser. If your only income is from benefits, this won’t matter, you will definitely qualify for a DRO. Even if you have other income it may be OK – although your income may be going up, your advisor can include extra disability expenses.

Does it matter if I went bankrupt 4 years ago?

No that won’t matter. The DRO Unit of the Insolvency Service will only refuse your application if you:

  • are currently an undischarged bankrupt; or
  • you are currently in an IVA; or
  • you have had a DRO in the last six years.

I’m staying with friends but when I get a place to rent, I will have no money

Applying for a DRO at the moment probably isn’t a good idea. I suggest you save up the money for a deposit and move out. Then you will know what your expenses are and what your surplus income is. You may well be right that you will be broke, but getting yourself settled is your top priority. Your debts – and any DRO – can wait.

I’m going to retire in about 6 months, what about my lump sum from my pension?

If you get a large lump sum from your pension whilst you are in the middle of your DRO year, your DRO will probably be cancelled. Unless you can postpone taking your pension until your DRO is completed, a DRO probably isn’t a good option for you. Talk to your DRO Adviser about this and about what your other alternatives are.

My maternity leave is ending in a few months – will this be a problem?

Your income will increase, but you may also get large childcare expenses, cost of travelling to work etc and your benefits may reduce, so you may still meet the DRO criteria. You need to talk this through with your DRO Adviser. If returning to work will be a problem for your DRO, then you may have other alternatives eg part time work for a few months until your DRO ends

Questions about income, assets and expenses

I don’t have any bank statements – does this matter?

Your DRO Adviser will want some proof of your income – if they ask for bank statements and you don’t have any, it’s usually easy to get one. Or they may be happy to accept wage slips and any benefits letters. The Insolvency Service doesn’t need to see your bank statements.

Are student loans treated as income when applying for a DRO?

Student maintenance loans and grants count as income for a DRO. The loan you get for tuition fees is ignored. If you are going to uni as a mature student, a DRO may well be a sensible option for you.

Why do I have to say what my partner earns?

A DRO won’t be refused because your partner earns a lot – they aren’t going to be told to pay your debts.  You are only being asked about their income so that it can be checked that your rent and bills are being fairly divided between you. If you earn the same, a 50/50 split would be normal.

My parents have been giving me money to help with my debts

Those are gifts and they could stop at any time. They don’t need to be reported on your DRO application as income.

Is my car worth what I can sell it for?

You should get a valuation using Parker’s Guide, look for the “private poor” option.

I have a car registered in my name for insurance, but it’s owned by my mother – what will happen?

Tell your DRO Adviser but this should be fine. What matters is who owns the car, not whose name is on the insurance or the V5 registration. You will probably need to provide some proof about who bought the car.

I’m unemployed and I pay my parent £30 a week for rent and board – is this allowed?

That isn’y going to be a problem – it would cost you far more to rent a room privately somewhere else!

Questions about debts

Why do I have to get my credit reports?

You are being asked for a credit report so that your DRO Adviser can be sure all your debts are being listed. This is for your own protection – any debts which are not listed on your DRO application are not included in it and so you will still have to pay them.

What details are needed about the debts?

Who the current creditor is, the amount and the reference number. If there are several reference numbers – the original credit card number, a debt collector account number and another number on your Experian record say – list them all to be on the safe side!

Do I have to include my broadband/mobile/car insurace contract which still has over a year to run?

You don’t generally have to include “service contracts” such as these example unless you are behind with payments – in that case they do have to be included.

But you need to check with the adviser setting up your DRO that the payments will be allowable as expenditure.

With a mobile contract, it may be set up as part loan and part service contract. In this case is it usually possible to include  the contract in your DRO but keep the handset and then get a PAYG sim-only contract. Talk to your debt adviser about this.

I stopped paying most debts ages ago but still pay two catalogues – is this a problem?

Technically this is called “preference” – paying some creditors and not others. That may sound alarming, but it’s pretty common. Although the DRO Unit can refuse a DRO application if this has happened, they assess how serious the preference was. Most people don’t have a problem:

  • if the preference was a while ago and before you took advice about a DRO, it matters a lot less – so from this point you must treat all your debts equally and stop paying any of them – for most people this means not paying anything to any of them. BUT don’t stop paying any priority debts without talking to your DRO Advisor first!
  • if you had been paying a family member or a friend and not paying commercial debts, that is seen as more serious.

Talk to your DRO Adviser – they may not be concerned or they may suggest putting off a DRO application for a few months so the preference is further in the past. But if you have problems with bailiffs or other urgent reasons it may still be good to apply now.

I used my credit card last month – is this a problem?

This is another common situation. It does depend on why you used credit – paying for an essential car repair is much less of an issue than taking the family to Disneyland! A DRO application won’t be refused because of this, but it is possible that some extra restrictions may be imposed if the DRO Unit thinks you have behaved recklessly.

Talk to your DRO Adviser. Some DRO Advisers don’t like putting in an application unless you haven’t used any credit for several months, but if the amount was small, or for an urgent need, you may want to carry on with it. Once you have decided to apply for a DRO you should not use any more credit.

I’m confused about rent arrears

Rent arrears are a debt that has to be included in your DRO. But if you are still living there, you are allowed to carry on repaying the arrears and if you don’t, the landlord or Housing Association/Council is likely to try to evict you. Talk to your DRO Adviser about this – it’s important you get an affordable arrangement in place to repay your rent arrears in place. This is one case where going to your local CAB for help with a DRO is good as they may know what policies local Housing Associations have.

Questions about how long the application takes

When my local CAB has checked my DRO do I then apply to the Insolvency Service?

No. Only approved intermediaries – your DRO Adviser – can submit an application for a DRO. Your DRO Adviser gets the information to go on the application from you and your credit records and you have to sign to authorise them to send in your application.

I’m about to pay the £90, has my application already gone in?

No. You will have been sent the letter with a barcode on it to pay the fee. The fee goes to the Insolvency Service. You then need to tell your DRO Adviser you have paid this and at that point they submit your application.

How long does it take to approve a DRO?

It’s quick! Your DRO Adviser will usually get an email one or two working days after submitting the application to say it has been approved. The letter to you confirming this, called the Debtor’s Notice, is posted the same day your DRO Adviser is told, so you usually get it the day after. You should keep this letter – not just for the 12 months of your DRO year forever because it is your proof of what debts are included in your DRO. The Insolvency Register is also updated, showing your DRO.

How many DROs are rejected?

Hardly any! Less than 1%. Most DRO advisers have never had an application rejected at all – if you think your adviser is being fussy, that is because they are doing all the checks so your DRO application will sail through.

How long do creditors have to object?

Creditors don’t have to agree to your DRO, there is no set time at the start for them to approve or object. A creditor can only object if they think you didn’t meet one of the DRO criteria. This doesn’t happen very often, and then the DRO Unit have to consider if the objection is accurate – most of them aren’t. It is VERY rare for there to be a problem with this – you don’t need to worry about it.

I am just about to pay the £90 and I have been told one of my debts has been sold

Tell your DRO Adviser – they may want to change the application. This isn’t a problem, it’s just a bit of a hassle.

I’ve paid my £90 DRO fee two days ago and I have had a letter from a bailiff about council tax

From this point it should be very quick, so you could simply ignore this letter, but tell your DRO Adviser and make sure your application has been submitted. If a bailiff calls, do not open the door under any circumstances, not even to explain about your DRO. See Do I have to let a bailiff in?

Other questions

Do I need a new bank account?

If you have an overdraft, it will be one of the debts in your DRO – you can’t leave it out. You will need to get a new bank account, but there is now a good range of basic bank accounts to choose from, see Getting a basic bank account.

If you don’t have an overdraft, you will usually be able to keep your current account. Your bank isn’t told you have started a DRO. Anecdotally NatWest and Halifax sometimes make you downgrade to a basic bank account from a standard current account.

Who is told I have a DRO?

Your creditors are told,  your name is included in the Insolvency Register (which lists people with bankruptcy, IVAs and DROs) and a marker will be added to your credit record. There is a procedure to not include your address on the Insolvency Register if you have had domestic violence or similar issues – talk to your DRO Adviser if you are worried about this.

Your landlord is only told if you have rent arrears. Unless you have an attachment of earning in place (which will stop) you employer isn’t contacted. Your partner isn’t told – but it is always a good idea to tell them yourself!

Your employer isn’t told unless you owe the employer money.

Will a DRO affect my partner’s credit record?

Not unless you have a joint account with them.

Do I have to send in monthly statements?

No! No one checks up on your income and expenditure during the DRO year. If this sounds unlikely, think about what the fees are – your £90 isn’t going to pay for any staff to be looking at your bank statements each month!

Can I move abroad?

Yes – tell the DRO Unit your new address and you will still have to inform them of changes to your income and expenses.

No such thing as a foolish question

I hope I have covered many people’s questions here. But it is always a good idea to tell your DRO Adviser about any concerns or questions that you have. Not just about your current situation and the application process, but about what may happen in the next year. It’s better to have this discussion before an application goes in!

More Debt Camel articles:

Can I leave a debt out of a DRO?

Do debt collectors still phone after a DRO?

DROs and your credit rating

Author: Sara Williams Tagged With:

Comments

  1. I have played online bingo with my Christmas money a few times is this gonna cancel my dro
    I also received a arrears letter from PayPal last week even though they know about my dro ? But when I look I line my name is still on the insolvency register ?

    Many thanks

    Reply

    • “I have played online bingo with my Christmas money a few times is this gonna cancel my dro” No, you can spend your money on what you like, it isn’t checked up on.

      “I also received a arrears letter from PayPal last week even though they know about my dro ?” You had a paypal debt in your DRO? If you did, then it’s fine for paypal to send you a letter saying you are in arrears. But it’s NOT fine if they are asking you to make a payments to them Are they?

      Reply

  2. Hello,
    I am about to apply for a DRO. Am I allowed to sign an “agreement to sell” agreement for a future purchase of a property that will take place some years after the DRO has finished? It’s for a future purchase, not now.

    Thanks.

    Reply

    • That sounds unusual. I suggest you talk about the details of the future purchase with the debt adviser setting up your DRO.

      Reply

  3. When you have been accepted for a DRO will the insolvency officer ask for bank statements during the moratorium period? It’s no issue obviously but I had a joint account, have taken my name off in anticipation of the DRO affecting the other account holders credit rating. I’m yet to set up in my name a basic account and transfer it all over so but may not bother unless this is something they want to see as it’s a lot to transfer.

    Reply

    • “will the insolvency officer ask for bank statements during the moratorium period” No.

      “I had a joint account, have taken my name off in anticipation of the DRO affecting the other account holders credit rating.” Good move.

      “I’m yet to set up in my name a basic account and transfer it all over so but may not bother unless this is something they want to see as it’s a lot to transfer.” sorry, what will you use for a bank account?

      Reply

      • Thanks for your reply.

        I was opening a basic bank account for two reasons. One because the bank advised it may help in future on their decision to upgrade my bank account as opening a bank account in the long run may prove harder.

        And two because I thought of I was investigated or asked to show bank accounts it may reflect on me if I’m operating out of someone else’s name. Basically all my house hold bills come out of this account. (I had to take my name off as the bank said they’d freeze it}

        Reply

      • I read conflicting info on the bank statements. My intemidiary says no too but some others who have been through it say the were asked at 6 months.

        Reply

  4. Hello

    I am needing to open a new Basic Bank Account before a possible DRO is granted. However, I wondered if I can actually just do a switch from my current bank account to a new basic current account with a different bank ? Or, do I just need to open a new account and do all the setting up of Direct Debits etc and inform my Income organisations too ?

    Thanks

    Reply

    • Hi there – prior to setting mine up I was with Barclays and I used HSBC switching service with no problems.
      I didn’t have any debt with the bank account, but my Barclaycard was part of the DRO.

      I had no issues, you just need to make your new bank aware that you are in the process of applying for a DRO

      Hope this helps

      Reply

      • Thanks Sara and James. I have read other advice that states best not to mention Dro as some banks could be less understanding!

        Reply

  5. Hi.
    I’m in the process of applying for a DRO.
    I’ve recently read something that I wasn’t aware of, but not sure how true it is.
    A lady told me short and sweet that she had a DRO.. and 2 years after it was completed she was meant to receive money via a PPI claim. Her comment was that she never received the money because it went to the debt she thought was paid off?
    Can anyone shed some light on this please?

    Reply

    • This is what often happens if the debt was in the DRO.

      For you, if you think you may be able to reclaim PPI and it could be a lot, do it now before you start the DRO. Because the deadline for starting a PPI reclaim is this August! So waiting and doing it afterwards is not a possibility even if the would come to you.

      Reply

  6. Hi There, I was in a DRO in June 2013, I know you have to wait 6 years before you can apply for another, but is that 6 years from start 2013 or from discharge in 2014 any info would be great Thanks

    Reply

  7. I have applied for a dro online and the application will be posted my wages were paid into my bank account however I have used the overdraft and therefore with wages paid in, it is still in the minus. I need to get by and pay bills, food, rent etc but I am using the overdraft which was my wages paid into the account. Will this affect my application?

    Reply

    • This won’t precvent your DRO being approved. Have you been advised to open a new bank account?

      Reply

  8. I had my DRO application submitted by Step Change late afternoon 5 April and still have no update if it’s going to be approved. I telephoned Step Change and the said they had had nothing back either and to call back Tuesday after bank holiday. Do some applications take longer to review? I turn 55 next January and had to confirm I wouldn’t have access to two small pensions within the year of DRO. I checked with both dormant pension providers one said I had to be 57 and the other after my 56 birthday. Could it be they’re checking this out. StepChange were very confident I would be approved my anxiety levels are through the roof.

    Reply

    • I am sorry but I can’t say anything sensible about this. It is very unusual to not get a decision within a few days.

      Reply

    • Thanks. Thought it might have been their timescales have lengthened like ours at work due to the amount of people struggling Step Change said check Register and call them back Tuesday, that would be 10th working day.
      Thinking they’ve decided to refuse it and now just waiting for refusal letter to see what will be the next step

      Reply

    • Just to update you just in case you have similar question in future. Spoke to SC Tuesday after the longest weekend. Having contacted IIS it was found my application and others hadn’t gone through on 5 April due to IIS systems being down for change over to new tax year. My application resent Tuesday as priority & successful next day so my twelve months have started from Wednesday.

      Reply

      • Phew! What a relief for you. Thanks for the update. I hope the rest of your DRO year passes peacefully.

        Reply

  9. Hello,
    I have a salaried job, but use my salary to fund a new business, so I am also self-employed. Am I able to apply for a DRO? My money left over each month is around £50 a month because of the expenses of my business, which includes employing a worker.

    Thanks.

    Reply

  10. Hello,
    Is it true that you must include a student grant in a DRO if there’s a risk that you are not going to be able to finish the course thereby generating an overpayment?

    Reply

    • I don’t know what sort of student grant this is that would result in an “overpayment”. But in general you can’t include a debt in a DRO unless you are actually liable for it right now, not may become liable at some time in the future. I suggest you talk to National Debtline on 0808 808 4000 about this and your options.

      Reply

      • Because I’m in such a financial mess, I’m worried I wont be able to finish the course, and then an overpayment will be generated, creating a new debt. I could either try to struggle on with the course, or end it quickly so that the overpayment is generated now so I can include it in the DRO. I dont want to end it, but I’m worried that my poor performance may seem like I’m not doing the course well (it’s online) and I may get penalised.

        Reply

        • I suggest you talk to National Debtline on 0808 808 4000 and ask if they think an “overpayment” may be generated. I haven’t come across anyone being asked to repay one, but they see more cases than me! They can also help you look at what your options are.

          Reply

    • Hello,
      I’m also a director of a dormant limited company. Is there any way I can resign as director for the DRO but remain as the owner, or shareholder of the company and allow it to continue existing? There is no one else connected to the company.

      Reply

      • Does the company have any assets – in otherwords, are the shares worth anything? If the answer is no, why do you care about this company? If the answer is yes, then the value of the shareholding has to be taken into account in your DRO application.

        Reply

        • It doesnt have any assets, no. I just want to keep it because I like the name and will want to use it in future years. The value of the share is £1.
          Am I able to resign as director but keep the company alive? Do Companies House allow that?

          Reply

  11. Just a quick question, when they are making the assessment that say you are left with £50 a month after rent, bills etc are taken out is overdraft taken into account? I am currently in my overdraft and have access to more than £50 a month but this would all be more “debt” of getting me deeper into my overdraft. i.e no money that is actually mine just overdraft.
    Would I be eligible? Sorry if I’m unclear, I can clarify.

    Reply

  12. I am in serious debt (£15,000) and I am desperate to sort it out. I have a baby on the way (due July) and will also be moving in with my partner the same month. Can I still get a DRo? I am currently working but will be receiving maternity allowance and child benefit for my three daughters from July onwards.

    Reply

    • If you are currently working, it will depend what your current income & expenditure looks like. You can’t apply now because you KNOW your income will fall. But if you won’t pass the disposable income rules now but will when you stop work, you can get the application ready to go as soon as that happens. So talk to a DRO adviser now.

      Reply

  13. Hi there, I have a guarantor loan and the guarantor is my father. He is currently in a debt management plan. If I enter a DRO he is now liable, what will happen to him because I know he can’t afford the payments?

    Reply

  14. Hi I have debts and get sent letters but moved address but want to put a stop to this I’m on universal credit and can’t afford to pay these is it worth getting a dro and how can i find out all my debts?

    Reply

    • Talk to National Debtline on 0808 808 4000 about a DRO – if you qualify, whether you have any other options.

      If you get copies of your credit reports from all three credit reference agencies (see https://debtcamel.co.uk/best-way-to-check-credit-score/) they should show most or all of your consumer debts. After that it’s a question of how often you have moved and how likely yiu are to have council tax arrears, utilitipy bills owing from previous addresses.

      Reply

  15. Hi,bit confused with the rent errors and applying for a debt relief order.My main debt is with a housing association, but if they can evict me for clearing the debt with a dro,then its not really worth getting one is it.

    Reply

    • I suggest you go to your local Citizens Advice – they may know what the policy is of your local housing association and can look in detail at your options.

      Reply

  16. Hi, I’m about to apply for a DRO. My son is currently my dependant but he leaves home and starts uni this year. Obviously then money for him on my expenditure form would technically go down but I do want to keep supporting him financially while he studies, would this be considered reasonable? He’s 19. I’m worried the change might cancel the DRO. Thanks.

    Reply

    • But you will also be losing child benefit and child tax credit? You should talk to the debt adviser setting up your DRO about this change.

      Reply

      • Thanks for the reply. Yes that’s right, but my income will increase to adjust for that as I will be taking on more hours at work. So my income should be roughly the same. My question is whether supporting a student is an acceptable outgoing. Thanks.

        Reply

        • That will depend on the details of your case, eg whether the student is living at home. You need to talk to your debt adviser about this. Often if you qualify for a DRO a student would get a full maintenance grant and i think this assessment is based on the previous year’s earnings.

          Reply

  17. Hi Sara
    I have my DRO approved
    Now I need to pay for my son moped insurance monthly they told me is going to as a loan for 600 pound
    Is this effect my dro.
    Thank you

    Reply

  18. Hi Sara,

    I’m in the process of deciding whether a DRO is for me and I’m a bit worried about being rejected. StepChange have told me I’m the perfect candidate but I’ve just realised that I have paid two creditors their minimum payment and not the other four creditors (one for a month and one for two months) within the last two years, is this a huge issue or is it something they will be lenient about? I paid them this well over a year ago, will be two years in Feb.

    Reply

    • Tell StepChange but that sounds like a tiny point that is too long ago to be of any significance.

      Reply

Leave a Reply

You have to agree to the comment policy.

This is the personal website of Sara Williams. For details see About Debt Camel.

Privacy policy

Comments Policy

If you need help with debts, read Good places for debt advice.

 

Subscribe to Debt Camel

Join the 3,000 people who receive an email when a new article is published:

Recent articles