A Debt Relief Order (DRO) is a simple and cheap alternative to bankruptcy if you are renting and have little money to spare each month to repay debts.
A DRO lasts for 12 months and during this time you must inform the Official Receiver (OR):
- if you receive any money or other assets, or
- if your income increases.
If this happens, the OR may ‘revoke‘ your DRO. That is the legal term for cancelling your DRO so you are back owing your debts.
But this doesn’t always happen – the OR has discretion about whether to revoke a DRO. And it is rare – only one in a hundred DROs are revoked.
If your DRO is revoked, you may simply be able to apply for another one if your situation changes and you again meet the criteria.
Contents
The DRO limits on assets and spare income
DROs have two important limits which matter if you get some more money:
- you cannot get a DRO if you have more than £75 ‘spare’ income each month that you could pay towards your debts;
- you cannot get a DRO unless the total value of your assets is less than £2,000. (This is second-hand value, it doesn’t include normal household goods and clothes, you are also allowed a car worth up to £2,000 in addition to this.)
If you get some extra income each month this may take you over the “spare income” limit. If you get a lump sum of money or a valuable gift. this may take you over the total asset limit.
In these cases, the Official Receiver will decide if your DRO should continue or if it will be revoked.
“My income has increased”
You usually need to inform the DRO Unit of any increases in your income. There are two exceptions when you do NOT have to tell the DRO Unit:
- if your benefits go up in April because of an inflation rise.
- if you are getting any extra “cost of living” payments from April 2023.
It is unlikely that small increases in your income will result in revocation unless you were close to the surplus income limit when your DRO started.
Don’t forget that you have to pay tax on a pay increase and your pension contributions may rise. Also any benefits such as Universal Credit, Child Tax Credit, council Tax Support etc may be reduced if you are earning more. So you may not be much better off.
Your costs may also have gone up:
- for example, if your benefits went up because you have had a baby, you will have new expenses to do with the new child;
- in 2023 inflation is high so a lot of other expenses, from food and petrol to mobile bills and energy costs may also have gone up.
A new Income and Expenditure assessment may be needed to show whether you are actually have more money left after your extra income and increased expenses are all taken into account. Your advisor will be able to help with this. Then you may be able to tell the IS that your income has gone up but explain that here is an income & expenditure sheet that shows you still do not have more than £75 a month spare income.
If your income hasn’t permanently changed, for example you did some overtime one month, then the OR is more likely to treat the extra money as a one-off payment than as additional income.
If you aren’t sure whether you should tell the DRO Unit,
talk to the adviser who set up your DRO as soon as possible.
“I have received some money”
You have to tell the OR about extra money
In a DRO, the money you receive is not taken to pay your debts, unlike in bankruptcy or an IVA.
But getting more than £2,000 may mean that Insolvency Service decides to cancel your DRO, leaving you back with your debts.
You must inform the OR about any money or property you receive. Update: except for the additional Cost of Living payments people are getting in 2023 – you don’t have to tell the DRO Unit about them.
This includes:
- a bonus from work;
- a valuable gift;
- money or property you inherit;
- money received from claims such as PPI or affordability refunds;
- lottery or other gambling winnings;
- a lump sum from benefits back-dating;
- a tax refund or correction to your previous year’s tax credits;
- money from the settlement of a court case.
Do this as soon as possible, even if you think the money is going to be covered by one of the situations mentioned below.
And you should inform them even if the amount you receive is less than £2,000.
If you aren’t sure whether you should tell the DRO Unit,
talk to the adviser who set up your DRO as soon as possible.
A lump sum from benefits back-dating
Here it depends on what the benefit is.
If the backdating is for PIP, DLA, Attendance Allowance or Severe Disability Premium, it will be treated as covering additional disability expenses you had. Here your DRO will not be affected even if the lump sum is large.
If you get a lump sum from backdating of other benefits, this is treated as getting a lump sum of money. If it is more than £2000, it could lead to your DRO being ended.
A settlement for a Personal Injury
Sometimes this will not affect your DRO even if it is large. The DRO guidance says:
Personal injury payments received during the [DRO year] will be dealt with depending on the composition of the payments (special and general damages). If the compensation relates solely to general damages and is received during the moratorium period, this will not adversely affect the DRO so long as the funds are used only for living expenses and not converted into tangible assets.
Your solicitor will be able to explain whether you are getting general or special damages, or a mixture. Broadly general damages are compensation for pain and injury and these will be ignored by the OR but you shouldn’t use the money to buy an asset until your DRO has ended.
Inheriting money
What matters here is the date the person died, not the date you actually get the money. See Inheriting money when in a DMP, DRO, IVA or bankruptcy which looks at this in more detail.
Money for a special purpose
The OR will take this into account. For example, you may have been given a bonus by your employer to spend on training.
How to contact the DRO unit
When your DRO started, you will have received a notice from the Official Receiver confirming this.
That notice has the contact details for the Official Receiver. You should use these details to contact them.
If you can’t find the notice, you can email the DRO unit at DRO.Unit@insolvency.gov.uk or phone them at 0300 678 0015.
DRO revocations are rare!
About 1% of all DROs are revoked.
Not all those revocations were because of someone getting extra money. They also include all the cases where a DRO was revoked because someone had originally had debts that exceeded the total limit when the DRO was started.
So you can see that the number of people who have problems with additional income or a large windfall is small.
It is extremely rare for a DRO to be revoked after it has completed. These are called Post Moratorium Revocations and the Official Receiver has to go to court to get one. There are less than ten a year.
My DRO is being revoked – can I get another DRO?
If your DRO is being revoked, you need to find an alternative way of dealing with your debts.
Obviously if you have inherited a lot, you can pay all your debts off! Or you could use the windfall to make full and final settlements on your debts.
Another option is a second DRO, if your situation changes so you again qualify. For example if you had a windfall or an inheritance of say £4000 and spent £2800 on essential expenditure, then you would again be under the allowed asset limit in a DRO.
Until recently, it has not been possible to get another DRO soon after one has been revoked as you can’t have more than one DRO in six years. But in 2021 this was challenged in court and the judge overruled the Insolvency Service on the basis that after the revocation the previous DRO no longer existed.
If you want a second DRO, go back to the adviser who set up the first one and talk to them about this.
The other main possibilities are:
- a Debt Management Plan; or
- bankruptcy. Bankruptcy has much the same effect on you as a DRO, so you can just use some of the money you have received to pay the bankruptcy fees. Your debt adviser can explain how to apply for bankruptcy.
Implications if you are thinking about a DRO
When you talk to a debt adviser about a DRO, do mention if you think your income may increase soon or you may get a lump sum payment:
- if you expect your finances to recover quickly – perhaps you expect to be able to get a new job – then you probably shouldn’t think of a DRO.
- if you may get a lump sum in the next twelve months then it would be better to wait and see if this happens before deciding on a DRO. If you get enough money you may not need the DRO at all! And if there isn’t enough money for that, you can still choose to spend some of the extra money on essentials that you need and then go for a DRO.
- don’t start a DRO if you expect to retire and get a tax-free lump sum in the next year.
For all of these “wait and see” situations, look at making token payments instead until you see how things turn out.
But unless you have some specific reason to think things will change in the next year for the better, I wouldn’t let worries about whether your income might increase or you might get a lump sum stop you from choosing a DRO.
As you can see from the statistics above, revocations are pretty rare!
Questions about DRO applications
9 tips to avoid having a prepayment meter
In a DRO what happens if I get a new partner
ChrisRowe says
Hi,
I am sorry, I have searched the forum and I found one post that doesn’t fully confirm my question. I hope somebody can help me to understand the statue of limitations.
I was accepted for a DRO in November last year and I have been offered a promotion. If I take this job offer, I could be earning more and my DRO will be cancelled.
The pay rise takes me just over the threshold but not enough to completely pay off all my debts that are in the DRO.
My question is the debts and the statue of limitations.
If I do take up this job offer, and my DRO gets cancelled, does the 6 years re-start from November 2022 or is it still from February 2018.
I hope that makes sense? It’s just one of the debts is going to be 6 years old in February 2024.
I honestly don’t know what to do. I want to be debt free and I was so happy and relieved when it got accepted, I had a lot of sleepless nights over it.
But I am also proud of myself for being able to get a promotion and really want to further myself at work.
Thank you in advance for any help and advice that you can give me. :)
Sara (Debt Camel) says
The pay rise takes me just over the threshold
Do you get any benefits at the moment?
Have you taken into account your expenses that have gone up since Nov last year – council tax, energy, insurance, mobile, food etc?
It’s just one of the debts is going to be 6 years old in February 2024.
what happened in Feb 2018 that you are starting this 6 year clock from?
stuart says
my wife and I work 28 hours a week each, we are on a DMP, it has about 3 yrs to go we are 18 months into it via stepchange. Our jobs are killing us, we have asked for our employer to put us on p/t contract of 14 hrs a week each instead, they agreed, doing so you qualify us for a DRO, as we would have to pay our rent fully out of our wages, etc, and leave us with less than £75 each, (we have one very old car, and no savings, private pension, we are 55), (if we dont apply for universal credit, we dont want to be on this benefit as it would force us to look for 30 hrs a week job( part of the claim commitment) as we no longer want to work 30 hrs, we want to be on 14 hrs each perm onwards, Would a DRO force us to apply for universal credit and be a fulltime job seeker, and thus also get a small help towards our rent. and take us above the £75 month each surplus? we are about to complete the change of hours very very soon with our employer.
Sara (Debt Camel) says
what sort of debts are in your DMP? how large are they?
How much money is in your personal pensions?
Stuart says
credit cards, overdraft and bank loans, our debts are £11,500 each, personal pensions are worth only around £300 total
Sara (Debt Camel) says
are you renting privately or social housing?
Stuart says
council social housing
Sara (Debt Camel) says
There is no obligation in a DRO to maximise your income by applying for all benefits that you are entitled to. I have no idea whether what you are proposing is a sensible route – if you talk to your local Citizens Advice they can help you look at “What if” calculations on whether you would be over the £75 limit if you claim UC – many people with part time jobs will not be. And Citizens Advice can set up the DROs if that is your best option.
Stuart says
done calculator .we would get an extra£55 a week if we claimed UC.byt then we would have to be active full-time job seekers and we would go over the spare £75 a month.so you see if we don’t claim we fit into DRO agreement.but if you do claim we aren’t.
Sara (Debt Camel) says
Talk to your local Citizens Advice. There a DRO expert can do the calculations.
Charlie says
My partner is currently in the process of making an application for a DRO.
We receive UC jointly, therefore have only listed half of the amount on his budget application. Also only his half of the bills.
I am currently on maternity leave , I am planning on not returning to work therefore our universal credit will increase, along with his ‘share’ of bills.
Will he be able to amend this once his DRO starts?
So his half of universal credit will increase , but his share of bills will to. Will this be ok?
Sara (Debt Camel) says
Probably! But he MUST explain all this to his adviser before the DRO is submitted as teh adviser can see the full picture
Elle says
Hi,
My DRO started in May for 12 months and I wasn’t working. I need to go back to nursing to keep my registration but I am worried that I will end up having my DRO cancelled if I do. Between a rock and a hard place – can anyone help? Thank you in advance, Elle
Sara (Debt Camel) says
Can you go back part time? How much money will you have spare if you do go back – remember any benefits you are getting will decrease.
Alex says
Hi there.
I had a DRO in place this past December. I get minimum wage. Will the DRO be affected by the increase in April? Doing the numbers quickly just from this, it puts me around £30-40 above the 75 limit. Is it safe to presume that this will be canceled out by taxes, inflation etc?
Thank you.
Sara (Debt Camel) says
Well council tax, broadband, mobiles, water may well be going up in April. Are you getting any benefits?
Alex says
Thank you for the fast reply.
Indeed, that’s what I figured. No benefits.
Common sense wise, if I don’t win the lottery/inheritance/gambling wins etc massive payrise, things will be ballanced out and don’t have to worry?
Sara (Debt Camel) says
probably. Talk to the adviser that set up your DRO in April.
Alex says
Cheers. Will do.
Mary says
My DRO ends 31st May 2024. I receive monthly UC, PIP and nhs pension ( have received these for a few years now)
I am 66 in April and can claim my state pension. My question is can I defer my state pension (even though I can’t afford to ) untill June 2024? DRO will be ended and do I have to notify them that I am pension age?
Thank you in advance for any guidance
Sara (Debt Camel) says
are you worried that if you don’t defer, you will earn too much for a DRO? I suggest you should talk to the adviser that set up the DRO as you will not be able to claim UC after state pension age.
Mary says
Thank you so much for your quick reply. Yes I am worried incase I am over the £75 I am scared to work it out. I know my UC will stop on pension age but would rather have nothing for the sake of 6 weeks till end off year DRO. would rather cut my throat than go through the sheer stress off being hounded for all that debt again.
Sara (Debt Camel) says
please talk to the debt adviser that set this up. You may not have a problem at all.
Mary says
Thank you kindly for your help very much appreciated.
Lily says
I’m on my 12month wait currently but am now expecting around £1000 compensation from damages I had at my previous property (mould and damp) I lost all my belongings owing to it and my daughter was hospitalised!
Will this if it goes through stop my DRO at the end of the year??
My total debts are £12000 and spare income is -£150 a month
Sara (Debt Camel) says
That is under 2k so unless you have savings, I don’t expect this will be a problem. But talk to the adviser that set up your DRO who will know all your details.
Lily says
Yea I have no savings and borrow money off family pretty much every month so I can buy food. Just worried if I receive that money and manage to not have to borrow money for a few months it would affect my DRO at the end
Sara (Debt Camel) says
Talk to the adviser who set up the DRO about this. You do need to tell the Insolvency Service but this may not be a problem. whether you There is no review of the DRO at the end.
Michelle says
Hi so I have just been made aware I have a terminal illness and also I have just turned 55 and didn’t know I had a really old pension. If I was to consider trying to take this early would this affect my DRO it’s around £6000
Sara (Debt Camel) says
I am very sorry to hear this. How long is it before your DRO ends?
Michelle curran says
It’s august it ends . So the pension is worth in total £26,000 but I can take 25% now. But I’m worried if I take anything my DRO will be cancelled.
Sara (Debt Camel) says
yes it will if you take over 2k.
How large were the debts in your DRO?
Michelle says
I’m not sure I think around 17,000.
Can I cancel it myself and take the lump sum and set up a monthly repayment plan?
Or would I just be best waiting till august of I can and take it then
Thank you for your assistance by the way
Sara (Debt Camel) says
So first you need to find out if you can withdraw all the money from your pension – if you have a terminal diagnosis this may be possible.
Your options are:
1) take a small amount of less that 2000 out now that will make your life easier and wait until the DRO finishes before withdrawing the rest
2) take as much as you can out now and tell the Insolvency Service. It will take a little while for the DRO to be cancelled. Then you can offer a payment plan or ignore the debts for as long as possible.
3) wait until August when the debts will be cleared and take the money out then.
Michelle says
So there is the option of taking the full amount also. If this was to be done and the DRO gets cancelled can I set up a plan with my creditors. Or is it possible they can just take my pension money themselves and take it all?
Thank you
Sara (Debt Camel) says
if you can take all the money out, then the options (1) and (3) that i listed above remain the same.
Option (2) is the same in theory but some of your creditors may be harder to deal with when they know you have enough cash to repay them in full.
I’m sorry but a lot depends on how much you need money now and whether you are likely to live much beyond August.
jenny blacknurn says
hi
I changed benefits from ESA to UC due to a change in my circumstances.I lost $800 pounds a month and as left with 14,000 of debt, after 4 months I finally got my LCWRA which is a extra 390 a month this is due to my mental health.My DRO has just go through will this effect it.
Sara (Debt Camel) says
Talk to your debt adviser who set up the DRO about this. Often you will have been running a “negative budget” spending less on things like heating, food and clothes than was good for you, so the extra money may just mean you can Manage again, not that you have heaps of free cash!
Deppi says
Please read below. I was waiting for my DRO to end to apply for UC. It is considered income.
Universal Credit and limited capability for work elements
The limited capability for work (LCW) element is the equivalent of a debtor who is claiming ESA and is in the work-related activity group. The limited capability for worked related activity (LCWRA) element is the equivalent of a debtor who is claiming ESA and is in the support group.
Both the LCW and LCWRA are regarded as income or an asset before or after DRO and the asset limit applies before the DRO. The property protocol will apply during the DRO.
The on-going income should not automatically be offset under care costs unless the debtor can show evidence.
source: https://www.gov.uk/guidance/debt-relief-orders-guidance-for-debt-advisers
Sara (Debt Camel) says
that is correct. But as I said, many people in Jenny’s situation are running a “negative budget” and may still be eligible for a DRO.
Deppi says
You are of course correct, but she is getting £368 for Standard allowance and £390 for LCWRA…. [edited out]… It’s tricky waters to navigate for sure.
Sara (Debt Camel) says
Which is why she needs to go back and talk to the adviser that st up the DRO. She may still be under the £75 limit, that depends on her expenses and there is not point in us guessing.
If a back payment will mean the DRO is cancelled, she has options eg using so,e of the back payment to go bankrupt, where if her only income is benefits she will never have to make an monthly payments.
Deppi says
p.s. Please note, if you have had your LCWRA backdated, probably you have for 3 months at least, it is considered an asset as well.
stu says
I’m considering a DRO, if I get one I know I have to report a change of income, during it.
how do you report a change in expenditure, eg your car insurance goes up at renewal, your rent , phone bill goes up in April, your shopping bill goes up or the amount of petrol you use , such as a new job further away, or car repairs as you need to up your monthly amount cos the car starts needing more repairs than was estimated in your initial drop application
Sara (Debt Camel) says
You have asked literally dozens of questions on different pages. Please talk to a DRO adviser about this.
stu says
not dozens, maybe someone knows the answer, on here, as I’ve googled it, but all the results are about increases in income, rather than expenditure
Sara (Debt Camel) says
Since April last year you have left 28 comments on 6 different pages. I have just looked at the MSE forum and you seem to have been doing the same there.
“How do I report…” – your DRO adviser can explain the details- it has no possible impact on whether you should get a DRO or not. Sorry but you need to actually make up your mind and do something, not keep asking questions.
Deppi says
I think, when on a DRO, spending more money makes no difference. You got your DRO assuming you have the minimum to live or they would push you to a different solution. Reporting you have less money left serves no purpose at all, unless you want to end your DRO and take a different approach, which is up to you.
Not sure what you try to accomplish, unless you want to justify increased income, in which case you need to call your DRO contact.
Donna says
Hi, So I’m just starting the process for DRO.
1) am I aloud to have a lease car through my work? I work for the NHS.
Sara (Debt Camel) says
is a car essential for your work?
and who are you talking to about a DRO?
Donna says
Sorry I was seeing if my comment would upload and just posted a quick question so it was very brief, my apologies.
I had reached out recently to PayPlan first, who were informative, however I was concerned as I had a -£160 a month after essential bills and they were advising me an IVA was doable as long as I could afford £50 a month. I owe about 25,000 all solely in my name. This has since been put on hold as unfortunately my husband now wants to separate. :(
I was able to use his mobility car for work and children’s schools runs (none of these are in walking distance and in my role I can cover a large area) I have no money to purchase a car, so now was thinking if I’d be able to access an NHS lease car if entering in to a DRO? After reading some threads from this site I thought I would contact national debt helpline, for clarity and they have not recommended an IVA but either DRO or Bankruptcy?
Sara (Debt Camel) says
With a negative income after bills, an IVA is not a sensible option. But if DRO with a lease car may well be – did you talk to to National Debtline about this?
Dave says
Hello I was wondering if I put in a request for a DRO and then day I get an inheritance, can I then still offer settlements to all the lenders rather than have to pay the full balances please? Also once DRO is accepted does the default date change if the DRO ever gets cancelled due to inheritance? I’m not expecting one but at an age where it’s(as horrible as this is to say) potentially likely in the next few years. Thanks
Sara (Debt Camel) says
Will your fantasy inheritance be larger than your debts or smaller?
Dave says
I spoke to national debt helpline and did not qualify for a DRO. Many thanks foe your help in the interim
Sara (Debt Camel) says
ok so one option in a Ddebt Mnagement Plan – in that case if you inherit any money you can definitely use it to make settlement offers.
And you can also look at reducing the balances in a DMP by making affordability complaints see https://debtcamel.co.uk/tag/refunds/.
Tommy says
I am currently on a DRO, my dept is around £10000 and the inheritance I’m going to recive is £4500, I know they will cancel my DRO is there anything I can do! Such as Disclaim the inheritance! If I do this is there anyway they can find out! And even with that inhertance money it’s not even going to touch the sides! I honesty am worrying so much and have no idea what to do,
I have spoke to money wellness and they advised that I should not do that beacsue if the insolvency find out they will cancel my order then I will be left with No inhertance and 10k of dept and probably restrictions for 15 years! But if take the money my dept they will cancel my order and I will still be worse of!!!
I’m desperate please help I need to make a decision in the next few days!!
Sara (Debt Camel) says
See https://debtcamel.co.uk/inherit-dmp-dro-iva-bankruptcy/. That says you should disclaim the inheritance and tell the DRO Unit at the Insolvency Service
So far as I know, that is the correct advice. I suggest you go back to MW and query what they told you.
Sara (Debt Camel) says
I have just checked and the gov.uk page confirms what I have said: https://www.gov.uk/guidance/debt-relief-orders-guidance-for-debt-advisers#inheritance. Mention this to MW.
Tommy says
Okay! But I’m not sure if that is meant before I signed up for a DRO? I’m currently on a DRO would that make any difference! I’m so confused I don’t want to get this wrong and it backfires on me
Sara (Debt Camel) says
It applies before and during a DRO. I understand why you don’t want to get it wrong, thats why I am suggesting you go back to MW and talk to them, because they incorrectly gave you the wrong advice.
Tommy says
Thank you so much! I have spoken to MW and they have looked into the guidance and have sent a email to insolvency asking them to give more information! Thank you if I had not seen that I could have made a big mistake! Life saver!!!!
Nat says
I have just had my dro application approved and I am so very relieved. I just have one question I can’t seem to find the answer to on their faq and I didn’t think to ask the advisor about. I had a lump sum from an affordability complaint in the last two years which I told them about, the money was spent on some furniture and household items like a second hand phone that were needed (nothing fancy) and on paying bill payments.
My query is can my creditors complain about my dro and try to get it cancelled? Maybe by arguing that I should have used the lump sum to just pay them/used it to try to settle with them. Or do the creditors not have any choice but to accept the dro?
Thank you
Sara (Debt Camel) says
Your DRO adviser would have said if this refund was likely to be a problem. (It doesn’t sound likely to me.)
Creditors aren’t asked to approve or reject a DRO. They will spend no time even thinking about it.
Miss G says
Hi Sara,
I have a DRO which ends mid December this year. I work in the NHS and I am due to receive a back payment in my October pay after receiving a 5.5% pay rise from April this year. I have looked online and can see I may get about £500 back pay and £65 extra per month going forward.
I also receive universal credit every month payments from £44 to £149 depending on my unsocial hours per month.
Therefore my UC will change every month with the pay rise and I will loose any UC payment in Nov due to receiving the lump sum back payment in my Octobers pay.
What I want to know should I report this to the DRO office as I will be no better off as it will affect my UC payments in future plus I will loose a payment due to the back pay payment.
Thank you for all your help you give.
Sara (Debt Camel) says
It doesnt sound as though you will be much better off, but talk to the adviser that set up your DRO about what to say to the DRO Unit.
Natalie says
I have recently just started a part time job for 18 hours a week on minimum wage. Can the DRO find out about this, I’m worried if I tell them my circumstances have changed I may have to make contributions to the money owed in my name.
Sara (Debt Camel) says
You have to tell them. Are your benefits reducing? Talk to the DRZo adviser that set it up
Gina says
My wife does occasional work as a freelance writer when she is well enough and gets an annual payment of royalties around £3k that goes into living costs. The rest of the year she only has PIP as an income. I support her financially and all our finances are separate. Where does this leave her with DRO as an option please?
Sara (Debt Camel) says
That will probably be fine, assuming she doesn’t own a house or have a car worth over 4k. Talk to a DRO adviser!
Gina says
No, neither of those. Thank you. She has had a court letter stating a ruling in her absence for £500 We never had communications before that as far as I know. She is neuro divergent so I never know. What would happen with that please? She is finding it hard and we cannot pay it outright.
Sara (Debt Camel) says
Is this a county court judgment? Or magistrates court?
Gina says
Yes it has come from the County Court, Civil National Business Center. But I am almost certain we didn’t get a claim pack. It was titled Judgement for Claimant (in default). The date is 18th September but it arrived a couple of days ago.
Sara (Debt Camel) says
Does she know what debt the CCJ relates to?
Does she have other debts apart from the CCJ?