All you need to know . . .
What is a Debt Relief Order?
If you’re struggling with debt in England, Wales or Northern Ireland, a Debt Relief Order is one of a number of possible solutions available to you. A Debt Relief Order (also referred to as a DRO) is a form of insolvency, similar to bankruptcy. Scottish residents have a similar option available to them, known as a Minimal Asset Process (MAP). While there are similarities between the two options, a DRO and a MAP are not 100% alike.
A legally binding solution to help you write off unsecured debt. It is a formal agreement between you and your creditors.
A Debt Relief Order is suitable for people on a low income and unable to repay their outstanding debts. You must have unsecured debt of less than £20,000, not be a homeowner, and very few assets to be eligible.
A DRO is a legally binding arrangement. It is similar to bankruptcy, designed to help you write off any unsecured debt that you’re unable to pay. After the fixed period, usually 1-year, qualifying debt will be wiped away, giving you a fresh start.
The promise of writing off your debt sounds very appealing and may make you want to apply for a DRO straight away, however, there are a number of factors to take into consideration. If you’re not eligible or your financial circumstances are due to change, you will not be able to proceed with a DRO. Applying for a Debt Relief Order can be a simple and straightforward process with the right expert help and guidance. Depending on your current circumstances, it can be the most suitable option to becoming debt free, for people on a low income with very few valuable assets.
If you’re wondering if a Debt Relief Order is the right solution for you, speak to a debt management specialist at Refresh Debt Services for FREE advice on 0800 121 48 63 or complete the online form on this page.
What are the benefits of a Debt Relief Order?
When a DRO is in place, you won’t have to make repayments to most types of debts that have been included within your application. Most of your creditors (people that you owe money to) won’t be able to force you to make payments to your debts. Generally, after 1 year, any qualifying debts will be written off. However, it is very important to remember that you are still liable to pay any debts that were not included in the application and any debts that aren’t eligible for inclusion within a Debt Relief Order.
What are the drawbacks of a Debt Relief Order?
Although your debts will be written off after 1 year, the effects of the Debt Relief Order will last for another 5 years on top of this. Your credit file will also be affected as you will be declared insolvent through the insolvency register. This can affect your credit rating for 6 years from the time your DRO starts, therefore, reducing your chances of being granted credit during this time period.
A DRO is a formal and legally binding agreement with your creditors. Not all creditors can be included. If your monthly income increases or you trigger a ‘windfall clause’, your DRO may be terminated.
If you would like to discuss the advantages and disadvantages of a DRO with a Refresh debt advisor, call 0800 121 48 63 or use the online contact form on this page.
How to apply for a Debt Relief Order
If you have decided that a DRO is the right option for you, we will put you in contact with a professional insolvency practitioner, should you need further help or advice with the mediation process, we’ll be right here to help.
Your insolvency practitioner has 2 roles to help you set up and complete your DRO. The first role is as an Advisor, confirming that you understand and are happy with how the DRO will work. At this point you will have to provide your insolvency practitioner details about any assets, your income, debts and creditors in order to see if you meet the qualifying criteria, and to see which debts can be included. The proposed order will look to ensure that you qualify before applying and that all of your eligible debts are covered by the DRO.
The second role your insolvency practitioner carries out is as your Nominee; once your application has been made, the insolvency practitioner will pass on the terms of the DRO to your creditors and the Insolvency Service. Your insolvency practitioner will inform the courts that your Debt Relief Order has been approved, and file all the necessary paperwork for you.
if you come into a windfall or a pay increase, your insolvency practitioner needs to be notified immediately as this could affect the terms of your DRO.
Apply now by calling 0800 121 48 63 or use the online contact form on the right.
How much will I have to pay for a Debt Relief Order?
The debt solution provides a number of benefits, you will need the assistance of a professional insolvency advisor. A Debt Relief Order costs £90, the fee will be paid directly to the Insolvency Service. The fee you pay is non-refundable. You’re only able to apply for a DRO once every six years. It’s important that the information you provide on your application is accurate.
Once you have submitted your application and paid the £90 fee, the Debt Relief Order will be granted by an Official Receiver if you’re eligible.
Most DROs will include a ‘windfall clause’, this means that if you come into any money during the course of your DRO, you will have to declare it to your insolvency practitioner as a source of income. These windfalls can include things like a pay increase at work. If you’re lucky enough to win the lottery or unfortunate enough to lose a family member, any winnings or inheritance could be given to your debt holders as part of this windfall clause.
Who is eligible for a Debt Relief Order?
If you want to apply for a DRO, there are certain conditions which have to be met in order to be considered eligible. Since a DRO is a legally binding agreement between several parties, the following conditions must be met, or your application will not be accepted:
• You’re unable to pay your debts
• Total unsecured debt must be less than £20,000
• Assets must not exceed £1,000 (home owners are not eligible)
• Disposable income after normal household expenditure should not be more than £50 per month
• You haven’t been subject to a DRO, bankruptcy, or IVA within the last 6 years
• You have lived, had a property or owned a business within the last three years in England, Wales or Northern Ireland
The following restrictions also apply:
• Unable to borrow more than £500 without informing the lender about the Debt Relief Order
• Ineligible to act as a director of a company
• Unable to create, manage or promote a company without the court’s permission
• Now allowed to manage a business without informing those you do business with about your DRO
If you fall into these categories, a DRO may be the right debt solution for you. To find out more about setting up a DRO, call us on 0800 121 48 63 or fill in the online form on this page.
What type of debt can be covered by a Debt Relief Order?
Debt Relief Orders are designed to tackle multiple debts at once, there is a list of debts which you can include under the agreement. If you’re struggling with two or more of the following ‘non-priority debts’ listed below, a DRO could help you write off your unsecured debts.
• Personal loans
• Pay day loans
• Credit cards
• Store cards
• Overdraft, including fees and charges
There are also ‘priority debts’ which can be included under a DRO, these priority debts include any council tax arrears you owe, benefit overpayments, repossessed asset debts and utility debts such as gas, electricity and water.
There are debts which can’t be included in a DRO, such as court orders permitting to child support, child maintenance, court fines or student loans. If you are having trouble making payments to any of these, they must be dealt with separately.
If any debts have amounted due to fraud, these can’t be included and will still have to be paid once the DRO has finished.
Is my home at risk if I take out a Debt Relief Order?
Home owners are not eligible for a Debt Relief Order. If you are a home owner and you’re struggling with debt, we recommend speaking to one of our advisors to see what alternative options are available to you.
Need more advice?
If after reading this, you think that a Debt Relief Order would be the right solution for you, contact our expert debt advisors to discuss the advantages and disadvantages of using a DRO to get out of debt. We’ll provide you with advice and guidance and be able to discuss a number of wider financial solutions available to you, helping you make the right decision for your future.
Call now on 0800 121 48 63 or use the contact form on this page.