Choosing between a Debt Relief Order (DRO) and other debt solutions is often a pretty easy choice! Let’s look at when a DRO is a good option for you and what the alternatives might be.
Debt Relief Orders
DROs are a form of insolvency in England, Wales and Northern Ireland. For an overview of DROs, read What is a Debt Relief Order?
They are meant for people who have little or no spare income and they have a strict set of conditions that have to be met – you must owe less than £30,000 (this maximum limit is going up to £50,000 in June 2024), you can’t own a house etc.
In a DRO, you make no payments to your debts and your creditors can’t chase you. After a year, your debts are wiped out. The criteria are not flexible – you have to tick all the boxes or you can’t have a Debt Relief Order.
If you are unsure if you do meet the criteria, contact National Debtline. They can set up a DRO for you, and they can talk you through the other alternatives if a DRO is not possible for you.
The alternatives to a DRO
If you do meet the criteria for a DRO, will any of the alternative debt solutions be better for you? Each of the major debt options is discussed in detail in the Debt Solutions section, including their pros and cons and how to set one up, so this post just highlights the differences with a DRO.
A common theme through these comparisons is that the alternatives all have to be based on a realistic budget. You may be able to manage without buying any clothes or having an emergency fund say for a few months, but if it’s going to take years to clear your debts, then any alternative that demands you live on too restricted a budget should probably be ruled out.
Snowballing or a DRO?
Snowballing is only possible if you can pay at least the minimum amounts to your debts each month. If you can do this, then snowballing is going to be a better option for you than a DRO, as with snowballing you will end up with a great credit record. But in a DRO you have less than £75 a month spare income to pay off your debts, so snowballing is rarely going to be a possible alternative.
DMP or a DRO?
It is useful to divide Debt Management Plans into temporary ones and long-term debt solutions.
A temporary DMP is a stop-gap. Some common situations where you may need a DMP for a few months or even a couple of years include:
- recovering from an accident or illness that means you can’t work;
- job hunting after redundancy;
- knowing your child care costs will decrease a lot in a couple of years.
If after this short period you will be able to pay your debts, then a DMP is an excellent solution for you.
If you want to use a DMP as the way of clearing your debts, then work out how long it will take. If this is a few years, fine. But if you are only paying off £75 a month, then a DMP may take a very long time – the Financial Conduct Authority has described these long DMPs as unsuitable. If this is the case, a DRO is probably a better option for you, as it will clear your debts in a year.
IVA or a DRO?
I have looked at this case in detail here: Choosing between an IVA and a DRO.
Overall, IVAs are more expensive, uncertain and take longer than a DRO – there aren’t any situations where you should choose an IVA if you can have a DRO.
Some state benefits can appear generous. Your IP may have assessed your possible IVA contribution at say £95 because they have not allowed enough additional expenses because of your disability. You may, therefore, think that you won’t meet the DRO criteria – but you will!
Bankruptcy or a DRO?
There a few situations where it is better to go bankrupt if you could go for a DRO.
This include:
- if you have very poor records of your debts. Normally the adviser that helps you set up the DRO can help fill in most of the gaps, your credit record can be a good starting point. But if there could be many debts you can’t remember, then bankruptcy is more certain as it wipes out all debts, whereas a DRO only gets rid of ones that are listed.
- if you expect your situation to improve in the next 12 months – if it does than a DRO may be revoked, but bankruptcy would carry on.
Will debt collectors stop calling after a DRO?
what happens to joint debts in a DRO?
Improve your credit score after a DRO
Mrs katie says
Thankyou Sara For your help 👍
William says
Q. I had a DRO December 14, when can I start rebuilding my credit rating ?
Sara (Debt Camel) says
now! it will never get to “good” until the DRO marker and the defaulted debts in it goes in December 2020, but you can start the process of getting some “good marks” on your credit record now so when the bad ones go your credit record is looking very good, not just empty.
See https://debtcamel.co.uk/repair-credit-record-dro/ for what to do.
Lois says
Hello again. I was in a Debt Relief Order which will now be revoked due to being notified by my old bank that I have a PPI refund of £2000.00. I was not expecting this and had only 6 months to go on my DRO, so am so very disappointed as I now have to consider Bankruptcy. I live with my sister who has offered to pay all of my debts off and for me to pay her back, but I just don’t know what to do. I am not working at the moment and am struggling in getting work as I have been out of work for 2 years due to mental health problems. I just wondered what you think of me accepting this offer from my sister? Any advice you could give me? Thank you.
Sara (Debt Camel) says
Sorry you have run into this, it’s so disappointing and such a waste of time but actually it is pretty easy to go bankrupt now, you have the money for the fees, its just a long but straightforward online form, you don’t have to go to court like you used to, and they don’t put your name in the local paper any more. And as you aren’t working you wouldn’t have to make any monthly payments.
Can I ask how large the debts in your DRO were? Were they mainly loans, cards, catalogues or a lot of utility bills and council tax too?
Lois says
I have £9000 in debts. Mostly to credit cards. Overdraft to my old bank, council tax, water and car parking fines. I got made redundant which had an impact on my mental health when I couldn’t fine work again and things got out of control.
Sara (Debt Camel) says
That is a lot of money. with the £2000 PPI money you have, you would still need to borrow £7000 from your sister,
Honestly I think it would be better for you to get a clean start through bankruptcy and not owe all that money to your sister. Sometimes people feel that owing a lot of money to soemone they are living with brings a lot of emotional pressure. I don’t mean your sister would be very opushy, but you find that if you get a job you feel you cant enjoy yourself at all and spend money on clothes or a short holiday as you think you ought to repay your sister.
But its very nice of her to offer!
Lois says
Also, a question I can’t find the answer to is can I take a job as an accounts assistant, as that is what I use to do, but don’t know if by being bankrupt this would disallow me? Thanks for you assistance.
Sara (Debt Camel) says
It depends on the job. When you applied for that sort of job before, were you ever credit checked? If you weren’t, then you may not be now. If you are credit checked, some firms would regard a DRO as being just as bad as bankruptcy.
Lois says
Thank you ever so much for replying.
Wendy says
Hi Sarah I had a dro in November 2018 so am just past the year part so I was wondering could I put some unaffordable complaints in about old debts that were included in the dro or would that be a bad idea thank you . Wendy
Sara (Debt Camel) says
Lots of people have done this with PPI refunds and not had a problem with their completed DRO.
BUT any refund may be set off against the debt that went into your DRO. So unless the refunds are large, you may not get much back.
Wendy says
Hi Sara
My debt relief order finished November 2019. My partner deals with provident and pays all his loans on time. They have recently told me they could offer me one but what is your opinion on that…I want to try and rebuild my credit rating and obviously would getting a loan from provident harm it even more? Thanks. Wendy
Sara (Debt Camel) says
getting a loan from provident is a disastrous idea – it is disastrously expensive and your credit score is going to be rubbish for several years.
Read https://debtcamel.co.uk/repair-credit-record-dro/ and go through the “clean up” process first.
When all that is done, then you can look at getting some positive markers on your credit record. As that post suggest, LOQBOX is a great option. Or a bad credit credit card, but there you have to be disciplined and pay the card in full every month to get the most benefit from it.
How long has your partner been borrowing from provident? Does he have other expensive credit?
Wendy says
Hi Sara
He has been borrowing from them for about a year. He has had payday loans in the past but not loads and is waiting for a supposed refund from wonga which he is meant to get by end of this month. They contacted him about it not the other way around. It isn’t a large amount but that doesnt matter. He has heard nothing since last email before Christmas. Do you think he should contact wonga? Thanks. Wendy
Jon says
Hi there, I am in a lot of stress at the moment. I am a guitar teacher and performer. I recently had to give up my work in schools (a ongoing police conviction which has affected my DBS Police Check ) before I got pushed. I work privately on a self employed basis doing lessons and performances. I have approx £17000 of Credit Card and Overdraft Debt outstanding and now cannot pay it off. I have never missed a payment till this month in over 10 years. I recently (few days ago) got some help off my partner and my father and paid a Financial agreement off from v12 finance( I owed £3000 for a guitar and approx £400 for some music equipment initally but needed to borrow £1017 to close account, it is now closed. The guitar is probably worth about £1800 as scratched from heavy use and other equipment approx £150). I have a very cheap car which is just probably only worth £200 and a battered 40 year old Motorhome which I paid £1800, 12 years ago and in very poor condition. I need the guitar and equipment for my work. Everything (assets) else I have had to sell to pay rent, bills etc. I don’t know what to do. Is a DRO possible ( not sure about the guitar and Motorhome) or Bankruptcy (again not sure about the guitar or Motorhome) I need the guitar for my work and possibly the Motorhome to live in as my partner is obviously very stressed too at the moment. It is the lack of knowledge that is driving me insane. Please help! Thankyou..
Sara (Debt Camel) says
Can I suggest you talk to Business Debtline: https://www.businessdebtline.org/. They specialise in helping the self employed and people with a small limited company. They can help with a DRO if that is suitable or advise on your other options.
If you have immediate payments you can’t make, it may be best to cancel the DDs at your bank and then tell the creditors you are talking to Business Debtline. They will usually give you 30 days breathing space to come up with a plan.
JP says
I entered a DRO in March 2014. Since then I have had no late payments and have a credit card, and car loan. Again these have always been paid on time. With the DRO due to be removed from next month I have been checking my credit file details. 2 credit card debts recorded in the DRO still show an outstanding balance. More concerning is one car is still recording a default every month. Will these defaults be removed at the same time as the DRO?
Sara (Debt Camel) says
Read https://debtcamel.co.uk/repair-credit-record-dro/ which looks at this – there may be done errors you need to get corrected or it may all be fine and be about to disappear from your credit record.
Stuart says
hi,
need some advice ,
I have had an IVA for aprx 9 months , and the reason I could not get a DRO was because my car was worth over £2k, but I have since had to scrap the car as I could not afford to repair . now I have a £300 banger and my rent is going up and I just can not afford the £90 a month any more .
would I be eligible for a DRO?
any advice welcome ty
Sara (Debt Camel) says
From what you have said, very probably. Read https://debtcamel.co.uk/end-iva-change-to-dro/ which looks at failing an IVA and switching to a DRO.
Zaria says
Hello
I have debt of £10000 and I’m married but do not have a mortgage in my name or any assets. I am sick a lot which effects me being able to work and really would appreciate some advice on what is the best solution. My husband an I are probably going to not be together for much longer and so I need to be able to rent somewhere so I need to keep a good credit score for independence. I was wondering if you could give me advice on the best solution for me please. The debts are from credit cards and a personal loan.
Sara (Debt Camel) says
I think you need to talk through your whole situation in detail with a debt adviser. I suggest you call National Debtline on 0808 808 4000.
Nats Daley says
Hey Sara and all..
I applied for a DRO back end of Feb 2020 as I imagined radio silence due to the cornavirus.
I have emailed step change but no response as yet their phone lines are open but not sure but email Any suggestions what to do next.
Or just wait it out.
Thanks for this site
Sara (Debt Camel) says
hi Nats,
sorry I am not clear what stage you are at – has your DRO application been submitted to the Insolvency Service? Or did you start it with StepChange and it has just got stuck?
Nats Daley says
Sorry let me re phrase…
Filled in all the paper work
Sent credit report over
Now not heard a thing not sure if insolvency service is still even operating havent paid the £90.00 yet so I’m assuming I stuck .. Thanks x
Sara (Debt Camel) says
In normal times it is typically 8-10 weeks for a DRO.
StepChange need to look at what you have filled out and set the DRO up, then you have to double check it – you don’t want ANY debt missed off. Then StepChange will tell you how to pay, you pay, then Stepchange submit the application.
Normally it’s only a couple of days then to approval, but I’m hearing it is taking a bit more. But the insolvency Service is still operating (unless you are in Northern Ireland?)
Nats Daley says
Thanks Sara
No in london I’ll wait till, Thursday maybe call again .
Stay safe x
Nats Daley says
Yeap applied via stepchange
Sent credit file report but unsure where claim stands as heard nothing back
Although some of the debts I listed have now appeared on my clear score credit file.
Thanks
Guy Incognito says
Hi
I’m a civil servant. I’ve just got out of a bad divorce and due to the market and poor decisions I’ve no money (Investments gone wrong) and am circa £50k in debt. I have no assets worth anything and am seriously thinking of going into bankruptcy or a DRO. I’ve heard several bad stories of IVAs so I don’t think that’s a fit. The issue I have is I take home circa £1900. Im currently crashing at a friends as I can’t afford anything due to my repayments. If I can rent somewhere I won’t be able to afford the repayments and frankly I’m *&£#ed. I can make it so that renting a place and living modestly will leave me with less than £50 a month. I owe credit cards and a loan. Nothing outside of banks. I need something reliable, my mental health has been destroyed (6 months off work, meds, horrible financial decisions).
Any ideas or input? Many many thanks for your help!
Sara (Debt Camel) says
Hi Guy,
you can rule out a DRO – you have to owe less than £20,000 in total debts.
Bankruptcy may be a sensible option for you with having a lot of debt and no assets – you need to talk this through with a debt adviser, I suggest you talk to National Debtline on 0808 808 4000. They can see if there are any better options and talk you through the pros & cons.
BUT timing also matters here. You will find it much easier to rent somewhere before you have gone bankrupt. So it may be sensible to make that your top priority.
One way forward is to stop paying ALL of your creditors. Cancel the DDs or STOs.
Tell ALL your creditors you are going to be taking debt advice and would like a breathing space – offer a token £1 a month payment If they don’t agree don’t pay them. You are saving up money first for a rest deposit & first months rent, then for the bankruptcy fees.
it’s important you treat all your creditors the same.
National Debtline can talk about this – from what you have said you don’t have any priority creditors.
Guy says
Thank you for your response. It’s appreciated
Matt says
Hi
I’m currently in a DMP. I owe just under 8000 in total. However my payments are small and it will take 10+ years currently. I’ve been on it since 2017. I’m just in a rut to what to do. I want to get a mortgage in a couple of years hopefully. I know I won’t be accepted currently. I just want to know my options. Is a DRO better for me as I fit the criteria. I have no assets. I just want to know the best option that will allow me to get a mortgage.
Thankyou for your time
Sara (Debt Camel) says
how large are your DMP payments a month?
A. Khan says
Hi,
I would like to apply for a debt relief order and have done a budget through stepchange. My budget shows a deficit of around £100. Will this be ok? Also I have a car valued at £3000 but my father paid for it at the time of purchase however the invoice is in my name. Please advise if this is ok. Many thanks.
Sara (Debt Camel) says
The deficit budget – is this if you don’t pay any money to your debts? Or is it if you make the normal debt repayments?
A .khan says
This is exclud8ng repayments for debts.
Sara (Debt Camel) says
IK so you need some urgent debt advice. Because all a DRO does is wipe oout your existing debts – if you are left3100 a mo th short, how will you manage in future???
This “negative budget” will not stop you getting a DRO but you need advice on what your options are. Talk to National Debtline on 0808 808 4000 or your local Citizens Advice,
The debt adviser can also talk about who really owns the car. For example, if you sold the car, would your dad expect you to give the money back to him?
A. Khan says
Many thanks for the reply. Yes my father paid the money however the invoice was in my name when I brought it. He would want me to pay the money back and just wandering if a later would suffice?
Sara (Debt Camel) says
A letter from him and your bank statement showing the transfer of money from him may be what is needed – talk to a debt adviser.
A. Khan says
I have spoken to the advisors and they seem adamant that it won’t be accepted.
Sara (Debt Camel) says
who have you talked to? what are they saying won’t be accepted?
Mark says
I took out an IVA 2 years ago, but after reading lots it seems i was eligible for a DRO at the time but wasn’t given this option by the finance support company i took the IVA out with (even though it is listed on their website).
I am in a worse position now than i was before the IVA despite taking a new job which was a 20% increase in salary but further to travel and needed a more reliable car.
What are my options?
Sara (Debt Camel) says
what is your current car situation?
Mark says
Current car situation is i took out a new hp in march as my previous car was too unreliable, this was agreed with the iva people but it would have been a case of if i didn’t have the car the money I’m paying on thay would have been allocated to the IVA after “reasonable” living costs.
Sara (Debt Camel) says
OK, I suggest you talk to National Debtline on 0808 808 4000 about whether you are eligible fore a Debt Relief Order. That is the key to understanding what your options may be.