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Can I leave a debt out of a DRO?

People sometimes want to leave a debt out of a Debt Relief Order (DRO).  A DRO is a form of insolvency with very strict criteria – it is explained in detail here, including looking at the pros and cons. You can’t normally choose to leave a debt out, but this article looks at when this is possible and what happens if a debt is left out by accident.

Why not include everything?

As the DRO is going to clear your debts, the starting point should be to get rid of them all! Some of the reasons people give for wanting to leave a debt out include:

  1. it’s an overdraft and you don’t want the bank account closed and have to open a new one
  2. it’s a credit card with very little debt and you would like to keep it for an emergency
  3. including the debt would push the total balance over the £20,000 limit
  4. it’s old and you aren’t sure of the details
  5. it’s a HP loan and you want to keep the car / furniture etc.

    Trying to keep your debts under £20,000?

The main principle – include all debts

The fundamental principle is that all eligible unpaid debts should be listed in the application for a DRO. This applies to debts which are not on your credit records.

There is no discretion to leave debts out just because it would be more convenient.

That rules out (1) – this isn’t something to worry about though, it’s now pretty easy to get one of the new-style basic bank accounts. There are great – you won’t be charged even if a direct debit is rejected. You can also have internet banking, contactless cards etc. See Getting a Basic Bank Account for a list of accounts to choose from.

It also covers (2) – you need to think about putting aside a bit of money for emergencies. Even £20 a month can add up and make all the difference.

(3) won’t work – you can’t omit a debt so that your debts appear to total less than £20,000.

If you try to leave a debt out, it will probably be discovered as part of the DRO application process. If it isn’t, then it may well be discovered by the Official Receiver’s Office who check credit records to make sure debts are not left out. If a debt is found that takes you over the £20,000 limit, your DRO will be cancelled and your application fee will not be refunded.

(4) and (5) however may come into the only two grey areas: unenforceable debts and HP debts.

Unenforceable debts

An “unenforceable debt” is one where the creditor could take you to court for a CCJ and win.

The Insolvency Service says that if you have evidence that a debt is unenforceable (such as a letter from the creditor or a court order) and don’t want to include it in your DRO because it would take your total debts over the £20,000 limit, then it does not have to be listed.

This can happen for a number of reasons but the two common ones are:

The debt is statute barred

If a debt is very old and you haven’t had contact with the debt collector for years, it may be statute-barred, which would make the debt unenforceable. It is not always easy to tell exactly when a debt becomes statute barred, especially for debts such as overdrafts. If you have an old debt you haven’t paid for more than six years, discuss this with the Approved Intermediary that is drawing up your DRO application.

The creditor can’t produce the CCA agreement

For credit cards, catalogues, HP agreements and most loans, if the creditor cannot produce a Consumer Credit Act agreement for your debt it is unenforceable. So if you ask for this and they reply that it cannot be located you could use this letter as evidence to leave the debt out.

The problem here is that it is a possibility that the agreement could be found later – if it is the creditor could then chase you for the debt as it has not been included in your DRO. And if including the debt would have taken the debt total over the limit, the DRO is likely to be cancelled – the legal term for this is “revoked”.

Also you need to allow plenty of time for the creditor to find the agreement. The Act says the debt is unenforceable if they creditor hasn’t produced it within 12 days, but in practice the debt collector often has to ask the original creditor for this and it is quite likely that it can be found within a couple of months. After several months it gets much less likely!

Hire Purchase debts

If you have any arrears on a HP agreement, it has to be included in your DRO and after a DRO you are not allowed to make any repayments to those arrears.  There is no discretion here. If a friend or relative can take over paying this debt you may still be able to keep the item.

Some HP agreements have a term which says that the agreement is terminated if the borrower becomes insolvent, which includes having a DRO. If this is the case, then the debt has to be included in your DRO. If you are unsure about this, your Approved Intermediary will be able to tell if this applies to you.

If you do not have any arrears, then you can choose to leave the HP debt out of your DRO application.  The future payments you need to make to the lender will be allowed if the item is classified as “part of the basic domestic needs of the debtor and his family”.  You need to discuss this with the Approved Intermediary putting forward your DRO because it is a complex area.

What happens if you forget to include a debt?

If you forget a debt by accident and it is not picked up by the Approved Intermediary but emerges after your DRO application has been made, then if the debt would take you over the DRO limit, your DRO will be cancelled.

If your total will still be under the limit then your DRO will not be affected but the debt will not be included in the DRO so at the end of the DRO period, you will still owe the money. This is unlike bankruptcy, where all debts are wiped out even if they were not listed on the bankruptcy petition.

What can you do if you are over the limit?

Trying to repay the debts for a while to get them under the DRO limit often doesn’t work very well because you don’t have much spare money and interest or charges may be added faster than you can clear them.

Two possibilities that may work for you are:

  1. trying to reclaim PPI – see How PPI can get you out of debt! for details. Have a go even if you don’t remember having any PPI or if you don’t think it was mis-sold, because you may have been signed up without realising it or the policy may have been wrong for you so that you could never have made a successful claim on it. You don’t even need to remember your account details if the loan or card was from one of the big banks
  2. trying to get interest on payday loans refunded – see How to ask for a payday loan refund for details.

Here you don’t need to get enough money back to clear all your debts, just enough to get your debt total under the DRO limit. Sometimes PPI redress or a payday loan refund won’t be sent to you but it will be used to reduce the debt you still owe – that’s fine.

If you are sent a cheque, then divide it amongst your debts, don’t just pay it off one of them as that would be “giving preference” to one creditor. If you aren’t sure about how to do this talk to an Approved Intermediary about setting up a DRO and they will be able to advise you.

Ultimately though bankruptcy is usually the best option if you would qualify for a DRO apart from the fact your debts are over the limit. The bankruptcy fees are high but you may be able to get help with them. Don’t opt for an IVA because the bankruptcy fees look too high – that is committing yourself to making monthly payments which you really can’t afford for 5 years – a big mistake.

More Debt Camel articles:

DRO applications – FAQs

What happens to a DRO if you get more money

Could PPI get you out of debt?

Could PPI get you out of debt?

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Comments

  1. Hi I have been advised by the cab to do a DRO as I have around 5 k debt with 5 creditors including working Tax overpayment, Housing Benefit overpayment, Argos card, catalogue, co- op energy etc. I am happy to go ahead as I only have £122 a week income as I work part time and have a deficit every month of about £140.
    I am 18 months into a Fiat PCP car finance on a Fiat 500, I paid an £2800 deposit (old car value) so my monthly payments are a small £59 a month. Ive paid off over £1000 so far and rang the finance company to ask about penalty to return the car before the 3 year ends and they want £1200!!!!!! They said I can sell it but there will be no equity. My dad said he will take over the credit and payments for me to help me out but the finance company said no to changing the credit contract to my dads name. What is my best option please, as buses and trains are going to be more expensive for me getting to work etc and I have 2 grandchildren I look after a couple of times a week so need to keep the car if possible.

    Reply

    • If there is nothing in the agreement which says that it will terminate if you become insolvent AND there are no arrears AND a
      member of your family is prepared to pay the leasing company then you may be OK to leave the debt out of your DRO.

      You need to discuss this with the person setting up your DRO. If they don’t seem familiar with it, show them the guidance note linked to in this article.

      Reply

      • Hi thanks for your reply. I went back to my local CAB yesterday and discussed the possibility of a DRO again, it seems the only way forward for me.
        The car is a grey area one advisor said it might be ok to leave out as you said previously, but another advisor said basically no way, told me I need to downsize from my 2 bed to lose the bedroom tax, and said I can’t afford a car anyway, made me feel much worse and I went home in tears. I don’t know what to do now it seems I can’t win whatever I do with the car, even though my father has offered to pay the £59 a month for me… :( :(

        Reply

        • OK there are two problems here. If the bedroom tax means your budget is unsustainable then a way needs to be found round this problem (downsizing, getting a lodger, having another family member live with you, having the deficit covered by someone else in you family…)
          The car issue, if the CAB advisers are not clear and agreed, then they could either talk to CAB’s NationaLSpecialist Debt Team or ask the DRO Unit for guidance about this.

          Reply

  2. Hello,i really need advice..Im in quite a bit of debt now..£8000 in total..I have been advised to go on a Dro..Only thing is i have a car on HP which i pay every month&it is essential for work..Are you allowed to keep a car on HP if you go on a Dro..I really dont want to give it up&so far have paid Two years of payments..Can someone advise me on this please..Northern Ireland

    Reply

    • Hi Sandy, you need to talk to the debt advisor that will set up your DRO about this situation, as this article explains.

      Reply

  3. I have a large and long standing mortgage shortfall debt from divorce and have never paid anything towards this as I have no surplus money and am on pension credit the Building Society has accepted this If they agree to write the debt off could I get a DRO as other debts are below the limit this many are already past six years with no acknowledgement?Bankruptcy is not affordable!

    Reply

  4. Hi

    I am looking at entering into a DRO as my monthly outgoings now exceed my monthly wage. I owe £21,000 in total which I know is over the permitted £20,000. Would I be OK if a family member paid off some of my debt so that I fell below the £20,000? Also, I have a car on a personal lease of which I’m contracted to for two years (I’m about 6mths into it), will I be able to keep this lease active as it is crucial for my work.

    Thanks in advance

    Mike

    Reply

  5. Hi i just took my debt pack to the cab and now im just waiting for some debt advisor to get back to me but i really need some money till payday will this effect my DRO if i take a small loan? Its like a week till i get paid and when i do i imagine i will be off to pay for my application then… Just worried ill get rejected it does not put me anywhere near the threshhold pf 20k im only in about 10k thanks in advanced

    Reply

  6. My CAB advisor obtained an Experian Credit Report on my behalf. He wants to include my Virgin Media monthly bill on my DRO. This account is in my name but is our only ‘luxury’ item and my two kids pay the bill between them each month. If it’s included in the DRO am I right in thinking that this should no longer be paid? I need contact with the outside world…tv phone & internet as I am disabled. I am concerned about losing these services…

    Reply

    • yoy need to talk to your advisor about this, but if your adult children are paying it there shouldn’t be a problem with this continuing after your DRO starts.

      Reply

  7. Hi,

    I have historic credit card and overdraft debt of about 19K and I appear to meet the criteria as in renting etc. With the amount of debt built up I was essentially living on credit. 3 months back my employment stopped and I used some of the overdraft credit on gambling transactions showing as paypal. I am hoping to resume employment in the next month. My question is would this affect my application or would I be better holding off the application for say 3 months so that none of these transactions appear?

    Reply

    • I am less worried about the gambling transactions that the fact you are expecting to get a job next month, it would probably be better to wait until after this so you know if you will still meet the DRO criteria. But talk to Citizens Advice now about this and the gambling.

      Reply

  8. I have an Amigo loan…. Would I have to include this in my dro as I wouldn’t want my sister to foot this bill?

    Reply

  9. Hi, I’m currently borderline the 20k limit with about 14 creditors and I’m currently getting all of my up to date figures from them, my question is I currently have a mobile phone contract along with a tablet and home broadband with Vodafone which are all up to date, would I still be able to continue with these or would they be ceased and included therefore taking me over the 20k limit? The same question applies to Sky which I have a TV package with.

    Thanks.

    Reply

    • You need to talk to a debt adviser asap – I suggest your local Citizens Advice (they set up over 50% of DROs) or National Debtline if you prefer to do this on the phone.

      From my experience, most people who think they are borderline are actually over it when the numbers are added up unless interest is frozen on all of their debts.

      have you looked at reducing the cost of your Sky package?

      Reply

      • I’m currently in talks with StepChange re my situation, they’ve suggested either a DRO or Bankruptcy, however, I’m getting all the details together and ensuring amounts are correct etc.

        I was curious regarding my mobile phone contract if I can keep it as it’s not in debt.

        Yes, I’ve already reduced Sky package down.

        Thanks

        Reply

        • Good, then StepChange will know your full situation and which debts should be included and what expenses it’s OK to include when assessing if you have less than £50 a week spare income.

          Reply

  10. Hi I got DRO but my biggest dept was missed off I contact my advisor at citizens advice who apologised and told me she’d already sent it off so nothing I can do about it any advice would be grateful thank you

    Reply

  11. Hi I have an amigo loan that my uncle is prepared to clear so that I can enter Into a DRO, would him paying it off have a bad effect on me getting a dro?

    Reply

    • If the debt is being repaid by someone else, this should not be a problem for your DRO. To make it very clear what happened, get your uncle to repay the debt directly rather than give you the money to do this.

      Reply

  12. Hi
    I have just had an appointment with cab and the only way forward is a DRO. I have a car on finance and 2 catalogues and a personal loan. Can i sell the car and pay the finance for it and the 2 catalogues with the money?

    Reply

    • You can’t sell a car on finance (HP, PCP, lease) because it doesn’t belong to you. What sort of finance is it and when does it end? Do you need a car?

      Reply

  13. I am looking to have a DRO.

    I have 2 overdrafts and a credit card.
    I also owe paypal ( merchant cash advance ) can i have this on the DRO as well ?

    Thanks

    Reply

  14. Hi, I currently have 16k worth of debt and I am in a Debt management plan. I have been adviced to go onto a dro because I can not afford more than £50 per month. My problem is I have a debt of £510 per month with a friend due to an ex screwing me over with a loan and only I signed the contract to pay this back for the next 2 years. I haven’t told them my full income for fear this would be put into the dro when it cannot as it is through a friend. Where do I stand with this and will the dro find out my full income and try to add this debt into a dro please? I don’t want to get into trouble for this as it is something I have to pay

    Reply

    • You cannot either leave this debt out of your DRO or give a false income figure to make it look as though you pass the under £50 a month test.

      Going bankrupt is not an option either as you would have sufficient spare income to make monthly payments which would mean you had no spare money to pay your friend.

      If you feel you have to pay this debt to your friend then you will need to finish that before tackling the rest of your debts – it is not clear to me that that will be possible. You can try offering all your other debts a low monthly payment but it may be hard to get this accepted. If you do manage to get through to clearing this debt to a friend, then you will have an extra £510 to pay to your debts so they should be cleared in three years.

      A more practical approach may be to ask your friend if you can repay over 4 years, leaving more income spare to be paid to your other debts.

      Reply

  15. Hi. I have recently been accepted for a DRO. My sim only contract with virgin media is coming to an end in 2 weeks. I would very much like to remain with virgin media. Will the DRO effect this? I’ve never missed a single direct debit payment in my first 12 months.
    Many thanks
    Pete

    Reply

    • Phone VM up and say you would like to renew. It’s unlikely there will be a problem, but if there is, well there are plenty of other places you can get sim only contracts from.

      Reply

  16. Thank you for getting back to me so quickly. I’m most grateful & will take your advice. Thanks again!

    Reply

  17. Hiya I’m upto about 19,600 on my DRO, it is in a waiting list to be processed and hopefully should be finalised in 4-6 weeks, part of my debt is car finance on a car that has been stolen, insurance will only be paying out 7000 so leaves me with a shortfall of 4000, my DRO are aware of this so have only included the 4000 in my DRO, as adding the full 11000 of the car will take me over the 20k limit, problem is now the car insurance said they are struggling to obtain the police report so may be another 2-3 months till the 7000 gets realised, can my DRO go ahead with just the 4000 on? I really don’t want to wait any longer, this DRO process has taken me about 3 months as it is and I’m weeks away from it completing

    Reply

    • You will have to ask the person setting up your DRO about this, but they may well want to wait until the insurance write off is clarified. I know this is frustrating, but the last thing you need is for your application to be rejected.

      Reply

  18. Hi, I am about apply dro for 6000 loan. But I also have catalogue debt 1000 which I don’t want to inude as it was for my children’s Xmas presents school uniform. Do I need to include this, as it is on buy now pay twelve months later.

    Reply

  19. I’m in the process of a DRO I don’t want to include my 02 contract because it’s not actually mine it’s just in my name so is it possible to leave this out? Also I have literally just changed internet providers and started a new 18 month contract can I leave that out?

    Reply

  20. Hi. I cant find my account numbers for my creditors for my DRO. My debts are listed on my credit file but only the last 4 numbers. (Help). Also how long does it take to get accepted for a DRO

    Reply

  21. Hi, I’ve been approved for my DRO and have a car on CPC finance. I already have a family member paying for it so that’s okay in DRO terms. However my contract runs out while waiting on my DRO to finish so I was wondering if I could take out another or do I have to hand the car back, leaving me carless?

    Thanks.

    Reply

    • I assume CPC finance was a typo for PCP, so you would have to make a large payment at the end to keep this car – could the family member make this for you?

      You can take out a new car finance when you are in a DRO but as it will be for more than £500 you have to tell the lender that you are in a DRO. This normally means you get refused unless you go to the rip off 40% APR type of interest which is killing on car finance.

      I am sorry but it would have been better to have thought about this before starting the DRO… But there is never an easy answer to expensive car finance – you would have faced the same problem if you had gone bankrupt or started an IVA instead of a DRO.

      Could your nice family member help you to buy a cheap runaround and avoid finance?

      Reply

      • Sorry PCP yes. Well I have the option of returning the car, exchanging the car for a new one using the equity if possible or buying the car. I was hoping to exchange really.
        I guess I was just wondering if it would void my DRO getting a new finance contract or am I okay as long as I don’t pay the monthly bill?
        It was discussed but the process took longer than expected.
        I was hoping to avoid a cheap runaround due to the problems I’ve had with them in the past but will do if I have to.
        Thanks.

        Reply

          • To get car finance when you are in a DRO, you have to tell the lender about your DRO. There is no chance of exchanging for a new one with VW who are not a sub=prime lender. The only people that would touch you are lenders such as Moneybarn who charge 40% APR. The cost of 40% APR over a 3 or 4 year contract is crippling – I recommend a cheap runaround.

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