You will only qualify for a Debt Relief Order if you meet some specific acceptance criteria. It is not suitable for everyone.
Included in this article:
- The maximum amount of debt allowed
- How much can you afford to pay?
- Are you a home owner?
- How much is your car worth?
Want to find out if a DRO is suitable for you? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
A Debt Relief Order is only available if you live in England, Wales or Northern Ireland. You cannot apply if you already had a DRO within the last 6 years.
The maximum debt allowed to qualify for a debt relief order
One of the main acceptance criteria for a Debt Relief Order (DRO) is the total amount of debt you are allowed to have. This is currently £30,000 (increased from £20,000 June 21). If you owe more you will have to consider a different solution.
You must include all of your unsecured debts. This means things like credit and store cards, personal and payday loans.
However in addition you must include anything you owe to HMRC, benefits and tax credit over payments, CCJs and debts for which you have already got an attachment of earnings.
The easiest way to find out how much debt you owe is to get a copy of your credit file. This will list all your creditors and outstanding balances.
How much can you afford to Pay towards your Debt?
Another of the important acceptance criteria for a Debt Relief Order is the amount of surplus income you have.
If your surplus is more that £75 a month (increased from £50 June 21), you do not qualify. Disposable income is the amount you can afford to pay towards your debts each month.
You would out this figure by adding up all your legitimate monthly living expenses and deducting them from your monthly income.
When calculating your income you need to take into account all the money you have coming in including benefits and maintenance payments as well as the money you earn.
If your disposable income rises above £75/mth while you are in a Debt Relief Order the agreement could be cancelled.
Are you a home owner?
If you are a home owner, you are not allowed to start a Debt Relief Order. The option is only available for people who do not own property.
Generally speaking you will qualify if you live in rented accommodation (Council, Housing Association or Private) or in lodgings or with family or friends.
If you are in rented accommodation but own a property elsewhere which you rent to tenants you do not qualify.
If you own a property which is in negative equity you are still not eligible for a DRO.
How Much is your Car Worth?
You are allowed to own a car if you want to start a Debt Relief Order. However its value must be no more than £2000 (up from £1000 June 21).
If you have a car on finance you must consider its second hand value without taking into account the outstanding finance.
In addition to your car your personal belongings must not exceed the value of £2000 (up from £1000 June 21). It is likely to will meet this requirement if you consider the true second hand (car boot) value of your personal items.
The value of your pension is not taken into consideration when valuing your assets given it is approved (under Section 11 (2) of the Welfare Reform and Pensions Act 1999).
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