Debt Relief Order (DRO)
A Debt Relief Order (DRO) is a formal insolvency option, ideal if you have debts under £30,000.00 and have little or no assets or surplus income. The cost of a DRO is £90.00. An application for a DRO can only be made via an adviser called an ‘approved intermediary’. Applications are sent to the official receiver ( a government official) via a special on-line system without the need to go to court. The official receiver will then deal with your application.
You cannot apply directly to the Insolvency Service yourself, you must get advice from an approved intermediary first, they will check that your eligibility for a DRO and that it is the right option for you, The DRO intermediary will give you advice and make the application on your behalf.
The following is a typical list of eligibility criteria to qualify for a DRO:
- unable to pay your debts
- have total debts of £30,000 or less on the date the application is approved by the official receiver
- have realisable assets of £2,000
- not have a car or motorbike worth £2,000 or more (disability adapted vehicles are usually excluded)
- have £75 a month or less spare income after normal household expenses are taken into account
- live in England or Wales (or have lived or run a business in England or Wales in the last three years)
- not had a DRO in the last six years
- are not a company director or trustee of a charity (some other professions may be affected by a debt relief order, your intermediary will give you more detailed advice)
If you and your partner both require a DRO, you need to make separate applications and each pay the £90 application fee. If you have a joint debt and only one of you applies for a DRO the other party will remain liable for the joint debt. You will not be able to apply for a DRO if you are already bankrupt or have an individual voluntary arrangement (IVA).
Most types of debt can be included in your application as long as your total debts are no more than the £20,000. It is important to include all of your debts, in the application. If you leave a debt out, it cannot be included later. Priority debts include; rent arrears, gas and electricity debts with your current supplier, arrears on your phone bill if you need to keep it as an essential service, council tax, business rates and community charge arrears, income tax, VAT and National Insurance arrears.
You must include priority debt arrears, but you will need to pay your ongoing payments for example rent, energy bills, council tax bills. Non-priority debts include; water arrears (but check status), credit cards and store cards, bank overdrafts and bank loans, loans to finance companies, catalogues, home-collected credit, benefit overpayments, family or personal debts, hire purchase and conditional sale agreements if you are in arrears (if you are not in arrears you may be able to exclude this type of debt in certain circumstances), hire agreements, parking penalty charges, and mortgage shortfalls. You may also owe debts from a small business such as: money owed to employees, debts to customers who have paid for goods or services that were unable to be supplied and debts to suppliers.
Although they still have to be listed in the DRO application, some debts do not count towards the £20,000 limit. Therefore you are still liable to pay these debts in full.
You cannot include:
- magistrates’ court fines
- maintenance, Child Support Agency (CSA) and Child Maintenance Service (CMS) payments and arrears
- student loans
- budgeting loans and crisis loans
- money owed under a ‘criminal confiscation order’; and
- debts resulting from certain personal injury claims against you