Last Updated: Sunday 17th March, 2013
What is a debt relief order?
A Debt Relief Order (DRO) is an order granted by the Insolvency Service. A DRO is basically a cheaper form of bankruptcy where after a year all your debts are cleared. There are certain conditions which must be met, see below. You should seriously consider it as an option if you live in England or Wales, on a low income and are struggling with debts of up to £15,000.
Applying for a Debt Relief Order
A debt relief order can only be obtained through an authorised intermediary who works for one of these "competent authorities". They will examine your finances to see if you meet the criteria below:
If any of the following applies to you then you can't use a DRO
- have any more than £300 in the bank
- own stuff which is worth more than £300
- have a pension fund greater than £300
- own a car worth more than £1,000
- Have no more than £50 a month disposable income
Don't be put off by these figures. The £300 figure attached to stuff you own only refers to "realisable assets". So doesn't include essential things like washing machines, tv's etc. The disposable income is the amount of income you have left once all the essentials eg food, heating, water etc have been paid for.
How much does a Debt Relief Order cost?
A DRO costs £90, although this can be paid up over 6 months. This is a lot cheaper than a bankruptcy order which is £345 for the petition and £150 for the court fees.
What debts can be included in a DRO?
The following debts can be written off with a Debt Relief Order:
- Arrears eg Rent, telephone, council tax, gas, electricity
- Credit card debts, unsecured loans and overdrafts
- Social find loans and benefit overpayments
- Buy now pay later deals
- Conditional sale or HP agreements
What debts are not included in a DRO?
The following debts cannot be included in a Debt relief Order and therefore must be paid separately.
- Court fines
- Confiscation orders
- Student loans
- Child support and maintenance
If you have are paying one of these debts then the amount you'll pay will be included in essential outgoing calculations and so lower your disposable income figure.