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 really rare – only one in a hundred DROs are revoked.
Contents
The DRO limits on assets and spare income
(The DRO limits were increased in June 2021. These are the new ones.)
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, but it is unlikely that small increases will result in revocation unless you were close to the surplus income limit when your DRO started.
You don’t have to tell the OR if one of your benefits has gone up, usually in April, because of a small inflation rise.
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 or Housing Benefit may be reduced if you are earning more. So you may not be much better off.
A new Income and Expenditure assessment may be needed, so any increased costs will be taken into account. For example, if your benefits went up because you have had a baby, your costs will also have gone up. Your advisor will be able to help with this.
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”
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. This includes:
- a valuable gift;
- money or property you inherit;
- money received from PPI or similar reclaims such as payday loan 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.
You should 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 that set up your DRO as soon as possible.
Some special cases:
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, and your DRO will not be affected.
If you get a lump sum from backdating of other benefits, this is treated as getting a lump sum of money and 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 a large amount. The DRO guidance says:
Personal injury payments received during the moratorium period 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 receive 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 often is a DRO revoked?
In November 2018, the 250,000 DRO was set up. At that date there had been 2,437 revocations, so about 1% of all DROs.
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 had debts that exceeded the total limit.
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.
My DRO is being revoked – what should I do?
If your DRO is being revoked, you need to find an alternative debt solution.
Obviously if you have inherited a lot, you can pay all your debts off!
The other main possibilities are:
- using the windfall to make full and final settlements on your debts;
- a Debt Management Plan; and
- 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 whether a DRO is right for you, 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 have been made redundant but expect to be able to get a job soon – then you probably shouldn’t thinking of a DRO. Have a look at making token payments instead until you see how things turn out;
- if you think you may get a lump sum in the next twelve months – from affordability refunds, a court case, or backdated benefits – 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.
- you should avoid starting a DRO if you expect to retire and get a tax free lump sum in the next year.
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 going for a DRO.
As you can see from the statistics above, revocations are pretty rare!
If you want to know more about DROs read this Guide to Debt Relief Orders.
Questions about DRO applications
Apps that make managing money easier
In a DRO what happens if I get a new partner
Fred says
Hi. I am thinking of applying for a DRO however I work in hospitality and my hours are business dependent. One month I can earn 900, and then next I might barley scrape my rent. This means I have to be careful with my money and sometimes It looks like I have spare income when in reality I am preparing for the next month.
Will this be a problem when calculating my income? how does one figure out the fifty pounds spare when you can never be sure of the next months income? Also with covid about I may not have a job one month and be back at work two months later.
Any hep would be appreciated.
Sara (Debt Camel) says
DROs can be possible with very erratic income. I think you need to talk to a debt adviser who will look at your variable income. If you are self employed talk to Business debtline, if employed on a zero hours contract, talk to National Debtline on 0808 808 4000.
Natalia says
Hi,I am on furlough and company that I work for will not support my flex.hours after furlough finishes so most likely I will have to give up work .I have received extra income this month ,student grand, and I am worry that my DOR will be cancelled. I have 2 incomes but I am not touching student loan as later I will need it to pay my bills .I do not know what to do now .My DOR will be cancel now and I will have to apply again later ?I would appreciate any advice .
Sara (Debt Camel) says
You need to talk to the debt adviser who set up your DRO. Student loans are treated differently. Please get some help so you know where you stand.
Natalia says
Thank you !
Jessie mill says
I have a debt relief order (2 months in) can I apply for a budgeting advance from UC? Up to £500? Do I have to notify them
Sara (Debt Camel) says
Yes you can. No you don’t have to notify them if you are asking for less then £500.
Tanya says
Hi, i’m a p/t supply TA in school with regular hours until Christmas. I also top up the hours with teaching. The money I earn varies a lot and i will earn nothing in the holidays. I’m thinking of a DRO as I meet the criteria – however what if the income would go over the spare £50?
Thanks
Sara (Debt Camel) says
You can have a DRO with an erratic income. I suggest you talk to National Debtline on 0808 808 4000 who will look at your income and the rest of your situation and say if you qualify.
Jonathon says
Hi, i received a DRO in august 2017, and it ended exactly 12 months later. However there is a possibility that i will be receiving a large amount of money from the sale of a house owned by a late family member. Will this have an impact to the DRO that i had or the accounts that it was requested to help with? or can i just collect the money and carry on since the DRO ceased?
Sara (Debt Camel) says
Your DRO has completed, your debts no longer exist and any inheritance is all yours.
Jonathon says
So I have no worries about the people I got the DRO from coming after the money?
Sara (Debt Camel) says
None. Enjoy!
Jonathon says
Thank you.
Charlie Turner says
Hi,
I’ve recently started a DRO and now I’m looking to get into employment again.
I usually work though agencies and on zero hour contracts so my wage differs from month to month.
I’m just wondering how can I explain a varied income that won’t always be the same to the OR?
Weatherman says
Hi Charlie
When you say you recently started a DRO, do you mean an application or that the application has been accepted & the moratorium has started?
The DRO Intermediary (who submits your application) and the OR should take a 3-month average of your earnings. If you have a ‘good’ 3 months before/during the moratorium and earn enough that it takes your disposable income over the £50 a month average threshold, then it might mean you don’t qualify or that the Order is cancelled. It’s also worth noting, however, that there’s no requirement on you to work as much as you can during the moratorium period – so you could just make sure don’t earn too much in that time.
Magda says
Hi
I have dro since 3months. My income might slightly increase as I will get back to work part time but same time my expenses will rise too. Will my dro be revoked?
Sara (Debt Camel) says
From what you have said, that sounds unlikely. If you are getting any benefits they may also fall a bit?
Talk to your DRO adviser about this.
M. Heath says
I get working tax credit and Martin Lewis says we will all get extra £500 in April
Will this affect my DRO which has only started this year.?
Weatherman says
Hi,
It shouldn’t do – but you should inform the Official Receiver anyway.
This amount is not treated as taxable income (so doesn’t affect other benefits, nor do you have to declare it on a Self-Assessment tax form). And the increase to the weekly amount of Working Tax Credits in April 2020 did not affect ongoing DROs. I haven’t been able to find confirmation that the same is true for this lump sum, but it has clearly been designed to be equivalent to a further six months of a £20-a-week increase. So I think it’s very unlikely it will affect your DRO.
Even if this is treated as a ‘lump sum’, then because its value is under £1,000, your DRO won’t be revoked if you have notified the DRO Unit promptly and the money is less than half of your debts. So to be on the safe side, I would tell the DRO Unit when you receive the payment, but it won’t affect anything.
carmen says
Hello,
If universal credit has gone up due to April’s new rates, would i need to inform the DRO unit? gone up by around £5 only. So not like its a big sum. Would this affect my DRO.
Sara (Debt Camel) says
In theory you need to tell the DRO Unit of increases in your income. In practice they won’t care about this change in UC rate. Also you may have had other expenses that have also gone up, eg council tax or utilities?
You can just send the DRO Unit an email – there seems little reason to worry about this affecting your DRO.
Yasmin says
Hi,
Quick question. My DRO was approved on 30 March 2021. However this May 2021 I may get an increase in my Universal Credit of about £500 due to becoming the main carer of my two children. Should I inform the official receiver of this increase in my Universal Credit? The increase will not actually leave me with any money left as this money goes straight to my Children and I won’t be spending it on myself or anything.
Should I worry about this increase or should I call Stepchange and let them know ?
Thank you
Sara (Debt Camel) says
Yes you should tell the official receiver about this increase but also explain the reasons – because your expenses have increased you won’t actually have any extra spare money each month. If you are worried about doing this, talk to StepChange first.
Roxanne says
I’m on uc and looking to get a DRO ASAP will it affect my claim at all
Sara (Debt Camel) says
A DRO will not affect your Uc.
Craig says
Hello, my income is approx £33k/year can I still take out a DRO if I fit all the other criteria?
Regards
Sara (Debt Camel) says
yes, there is no limit on the income. Talk to an adviser asap, I suggest National Debtline on 0808 808 4000.
Craig says
Thank you.
Do you know how it works regarding living with a partner and taking in to consideration their income to the household even though all the debt is mine?
Also will I need to give them copies of my wage slips/bank statements as I currently don’t have any of them.
Thanks
Sara (Debt Camel) says
It is normal for your partner’s income to be taken into consideration to determine how much of the bills each of you should pay. So if you earn twice as much as your partner, you would be expected to pay 2/3 of the rent, utilities, council tax etc.
It’s up to the debt adviser you talk to what they want to see by way of pay slips, bank statements etc. presumably you can get these if you need them?
I think you should talk to a debt adviser now. A DRO could be perfect for you, or you may not be eligible, or there may be better options – if you have big enough debt problems to be thinking about a DRO then you need good advice immediately. I suggest you phone National Debtline on 0808 808 4000.
Craig says
Ok thanks.
I can get the required documents.
I have debt to a family member would this have to be added to the DRO or can I keep this separate?
Regards
Sara (Debt Camel) says
all debts have to go into the DRO. Of course there is nothing to stop you making gifts to the family member later on… but when your DRO adviser works out how much “spare income” you have each month, payments to your relative will not be allowable as expenses.
Mj90 says
I’m looking to take out a DRO however I have a student loan/grant scheduled for August
£1500 grant
£350 maintenance loan
I will not get any other money from student finance until October 2022
I’m not sure how this is taken into account, If it will have a detrimental impact on a DRO getting approved.
Sara (Debt Camel) says
I don’t think it will be a problem – DROs for students are pretty normal. Talk to a debt adviser such as National Debtline on 0808 808 4000 about your situation.
Paul says
Hi Sara … I completed a DRO that went through on 14th April 2021. Friday I received notification that I was due a tax rebate that I was not aware of at the time of doing the DRO and is due to be paid back to me in my bank for £1299.99. I have contacted the DRO as was the right thing to do but I have also stated that I was not aware I would receive this. My salary has not changed and I do not expect another lump sum before my DRO ends or a salary change. I have also said that if they remove my DRO then it will put me right back into the same situation I was trying to eleviate from as I had balances over £14k in total being included. I have done as they have advised but what are now the outcomes of being honest with the DRO?
Thanks
Sara (Debt Camel) says
So the DRO Unit will make a decision as to whether your DRO should be revoked.
Can you let me know what happens?
If it is revoked, then your simplest option is probably to apply promptly for bankruptcy – the tax rebate giving you the money to pay the bankruptcy application fee. Talk to the adviser who set up your DRO to see if you have any other sensible options.
jimbob says
I have discussed with you previously about inheriting while in a dro. I got it wrong about amount. Apparently the amount literally matches the debt in the DRO. Does that mean you are legally obliged to clear it
Sara (Debt Camel) says
No. But her DRO will be revoked, so that would probably be a sensible option. What sort of debts were in her DRO?
jimbob says
3 credit cards and 2 store cards. 5.6k on ccs and 600 pound on scs. Main reason for asking as mentioned before some home improvements desperately needed. Income and expenditure very close and take many months to save enough
Sara (Debt Camel) says
I think she (or you) need to talk to the adviser that set up this DRO about her full situation. She could look at making dome settlement offers. But she needs someone to help her decide what to do in detail and that person is not me.
jimbob says
One other query i have understanding what i read. A CAB piece talks about creditor actions upon DRO revoked. Comments about interest lost being applied. My example could this be right. Vanquis credit card. Roughly before dro interest and charges 130 per month. Probate say takes 6 months. Could that mean possibly 800 pound being added to balance when they pursue you again
Im probably over thinking.. Probably trying to cover too many basis too soon
Sara (Debt Camel) says
It would be unusual for a credit card to do that.
But she does need to wait and see how this goes. There is always the option of spending some of the money on essentials and going bankrupt.
jimbob says
Thanks for that. As you say just wait now as it could be nearly a year away and then follow our advisers advice. If all the cards followed a procedure of adding lost interest could be 1000s more. Its just the article seems to come across as though they do add lost interest. Thanks again for all the great work and help you have been to me and many others
Sara (Debt Camel) says
If all the cards followed a procedure of adding lost interest could be 1000s more.
That is very unlikely to happen.
jimbob says
Just managed to ask the CAB. They advised creditors would just start to re-apply charges from date of DRO revocation.
Sara (Debt Camel) says
That sounds much more likely.
jimbob says
Unfortunately they have now totally changed the goalposts. Apparently the dro will bbe revoked from date of death. They say it is classed as an asset now not when money received. CAB suggest disclaim. Stepchange suggest that is illegally disposing of asset to avoid paying your debts. Really getting confusing and scary now
Sara (Debt Camel) says
No they haven’t changed the goal posts – the date of death always was the relevant time as I said before https://debtcamel.co.uk/proposed-dro-changes/comment-page-1/#comment-424435. And I said there that she can disclaim…
But I don’t understand why you are panicking, I thought you had accepted that the DRO will be revoked and it was a question of what she should do next?
Sarah says
Hi Sara, just wondered if you could help my partner has an iva but I think a dro would be a better option for him,but my only concern is twice a year he gets a bonus from work which we use for Christmas and birthdays the amount differs each time as its all depends on profits for the company he works at the money could be any where upto £4000 for the year, do you think this would be a problem for him, he would tell the adviser in the beginning when applying for the dro. Thanks for your help.
Sarah
Sara (Debt Camel) says
If he receives more than £2000 during the twelve months of a DRO it is very likely to be cancelled.
How far through the IVA is he?
Sarah says
Hi, ok thank you. He’s 15months into his IVA. I just don’t feel its the right option for him,someone phoned him from a company and just went ahead with it, they’ve already increased his payments from £101 to £131 but when you look at the calculations they have done it shows he only has a £100 a month left after paying everything plus the my money they took in to calculations us wrong by £22.20 a month its not alot but it is if you don’t have it.
Thanks for your help
Sarah.
Sara (Debt Camel) says
How much will they be taking of his bonus?
He should object if your money is incorrect.
Sarah says
In the last phone call they said they will adding on £400 to the end of term so if that goes on every year we are looking at an extra £2000 at the end!
Yes he is going to phone them about it.
Its with a company called creditfix have you head of them?
Sarah
Sara (Debt Camel) says
how large were the debts going into the IVA?
Sarah says
It was just under £20,000.
Alice karlo says
Hi I got a debt relief order in oct 2020. I have had a housing disrepair claim finalised for £850 that is supposed to be reaching me as soon as the repairs are carried out in September 2021. Will this effect my dro ? Thankyou
Sara (Debt Camel) says
You do need to tell the Insolvency Service about getting it, but that should be OK if it is the only lump sum payment you have received during the DRO.
Hopefully that will be a good end to the DRO year for you with your debts gone, your repairs carried out and a bit of money in the bank!