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.
Update – the DRO limits described in this article are being reviewed and they may be increased in May 2021.
See Proposed DRO changes for details.
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 the common questions I hear about DRO applications.
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.
Can a DRO be refused?
Yes but it’s very rare!
In 2019 the Insolvency Service approved 27,497 DROs and rejected just 78. So less than a half a percent of applications are refused.
If you think your adviser is being fussy and doing a lot of checks, that is because they are making sure there won’t be any problems so your DRO application will sail through. Most DRO advisers have never had an application rejected at all.
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.
If you get a backdated amount when your PIP application is accepted, this won’t be a problem for your DRO. Backdates amounts for ESA though can be a problem – talk to your DRO adviser about these.
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.
Also it can be simpler to find somewhere to rent without a DRO (or bankruptcy or an IVA) on your credit record.
You may well be right that you will be broke when you have moved, 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 can get a valuation using Parker’s Guide, This gives a range of values for your car – talk to your DRO adviser who may agree that the bottom end of the range is likely to be acceptable.
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’t going to be a problem – it would cost you far more to rent a room privately somewhere else!
I’ve made a claim for PPI or a payday loan refund – should I delay until this is sorted?
It may be best to get on with the DRO now, but read “If I get a PPI refund, what will happen to a DRO?” which looks at this in detail.
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 insurance contract which still has over a year to run?
These are “service contracts” – you aren’t repaying a loan, just paying for a service, eg supply of broadband, throughout the year. You don’t generally have to include service contracts unless you are behind with the 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 an 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 have a car on HP – is this a problem?
You have to talk to your DRO adviser about this as it can get complicated. Briefly:
- any arrears on the HP have to be listed as a debt in your DRO;
- if you don’t have arrears, the HP doesn’t have to be listed and then it doesn’t count towards your the £20,000 limit;
- the car finance company may sometimes choose to end the agreement and repossess the car even if it is not listed. (This also happens in bankruptcy and IVAs.)
- your DRO has to decide if your future payments to the HP will be an “allowable expense”.
Of course if you don’t want to keep the car, you can hand back the keys and then list the debt in your DRO so it is wiped out.
I am repaying a Universal Credit advance – can this be included?
Yes, it can. UC Advances are debts that should be included in a DRO. When the DRO is approved, any deductions from your current benefits for these should stop.
This also applies to benefit and tax credit overpayments. But it does not apply to Social Fund loans – these cannot be included in a DRO.
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 may 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 a couple of 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. It’s a good idea to keep this letter safe, even when your DRO has finished, because it proves what debts are included in your DRO.
The Insolvency Register is also updated, showing your DRO.
How many DROs are rejected?
Only a tiny number of DRO applications are rejected – less than one in three hundred applications.
If your adviser has agreed to put your application forward, it is because they have already made all the checks and they don’t expect any problems.
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?
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?
Only if you have a joint bank account or loan 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 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!