Is a Debt Relief Order Suitable for me?

A Debt Relief Order (DRO) is generally suitable for people with little or no assets who are unable to make payments towards their debts each month.

  • Does where you live affect whether you qualify for a DRO?
  • The Financial Criteria which you need to meet
  • Which debts can you included in a DRO?
  • What happens to your Pension?

Where do you live?

In order to apply for a Debt Relief Order it is not necessary to be a British National. However generally speaking you must be living in England, Wales or Northern Ireland.

The DRO solution is not available if you are living in Scotland. You will need to consider one of the debt solutions available to you locally.

If you have recently moved to England, Wales or Northern Ireland you will not qualify for a DRO until you have lived here for at least 6 months.

If you used to live in the UK but have now moved to another country outside of the EU you can still apply for up to 3 years. If you live within the EU you can not apply unless you move back to the UK.

The Criteria required to start a Debt Relief Order

You must meet the following criteria to qualify for a DRO

1. Your total debts must not exceed £20,000
2. Your disposable income must not exceed £50 per month
3. You must not be a home owner. If you own a home or have a mortgage you do not qualify
4. Your personal belongings must not exceed the value of £1000 (excluding your car)
5. If you own a car it must not exceed the value of £1,000

In October 2015 the total debt which you can owe to be eligible for a DRO increased from £15,000 to £20,000. In addition the value of your personal assets increased from £300 to £1000.

Debts that can be included in a Debt Relief Order

The Debt Relief Order solution is specifically designed to deal with unsecured debts. You can include almost any unsecured debts including but not limited to the following:

  • Credit & Store cards
  • Personal loans
  • Bank overdrafts
  • Payday loans
  • County Court Judgments
  • HMRC Debt
  • Benefits overpayments (unless due to fraud)
  • Council tax and utility arrears

You cannot include secured debts in a DRO. Secured debts are things like HP agreements. Other debts that cannot be include are Court Fines (such as speeding fines) and Student Loan Company debts.

Can you start a Debt Relief Order if you have a Pension?

When the DRO solution was originally introduced if you had a personal pension valued at more than £300 you would not have been eligible to apply. However this rule was changed on the 6th April 2011.

Now if you have an approved personal pension fund (under Section 11 (2) of the Welfare Reform and Pensions Act 1999) of any value you can still apply for a Debt Relief Order.

This covers the majority of occupational and personal pension schemes. As such if you have a pension you will normally be eligible to apply as long as you meet the other criteria defined above.

Is your financial situation likely to improve?

Your DRO will remain in place for 12 months from the date it is approved. If your financial circumstances change during this time the arrangement could be affected.

If your income improves or your living expenses fall this may mean that that your disposable income rises above £50/mth. If this happens the Order can be cancelled by the Official Receiver.

If it is cancelled you will return to the position where you have to pay all of your outstanding debt. You will no longer be protected from your creditors. They can restart their collections activities against you.

After starting a DRO it is not normally in your interest to try and improve your income until you are discharged. If your income does improve while the Order is in place it could be cancelled.

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