Introduced into English law in April 2009 Debt Relief Orders are designed to help people with serious unsecured debt problems who cannot afford to declare bankruptcy. Once a debt relief order is authorised by the official receiver, all of the person’s debts are taken away from them. They will normally not be asked to pay anything towards the debt as they cannot afford to do so.  Generally after 12 months, the order will be lifted and any outstanding debt written off. So far over 4000 people have made use of this new legislation.

There are a number of strict criteria that you have to meet before you can apply for a Debt Relief Order (DRO). This is because this solution is aimed at helping people who are surviving on very little money each month and have no disposable income. As such alternative debt management solutions such as individual voluntary arrangement or a debt management plan would not be suitable.

How much debt do you need to qualify for a Debt Relief Order?

You must be insolvent – You can only take advantage of a debt relief order if you truly cannot afford to repay your debt. This means that if you have any assets, these must be worth less than your total unsecured debts. In addition the money you have available each month to repay your debt must be less than the agreed minimum monthly payments.

Debt Relief Orders can only be used to deal with unsecured debts. Mortgage or secured loan debts cannot be included. The total of your unsecured debts (credit cards, catalogue debt, pay day loans, doors stop loans) must not be more than £30,000 (increased from £20,000 in June 2021)

What must your income be to start a Debt Relief Order?

The level of your income is not an issue in terms of DRO criteria. What is important is how much disposable income you have. This is the amount you have left each month after all your household expenses are accounted for. To be eligible for a DRO your surplus income must be less than £75 per month.

In addition your valuable assets are not allowed to be more than £1000. There are some items excluded from this figure such as clothing, bedding, furniture, household equipment and other basic items that you and your family need in the home. You may also have a car worth up to £2000.

** Update** From the June 21 the maximum value of your belongings allowed in a DRO rose from £1,000 to £2000. You are also allowed to own a car valued up to £2000.