When debt starts to feel unmanageable, the idea of finding a clear and affordable solution can feel out of reach. But for those on a low income with limited assets, a Debt Relief Order (DRO) might offer a way forward. It is a formal debt solution designed to help people who are unable to repay what they owe and have little to no spare income.
So, what exactly is a DRO, who is it for, and how does it work?
A simple, low-cost solution
A Debt Relief Order is a way of writing off certain debts if you cannot afford to pay them. It is available to people in England, Wales and Northern Ireland who meet specific criteria. Unlike bankruptcy, which can be expensive and more complex, a DRO is designed to be more accessible and less intimidating for those with smaller debt levels.
At the time of writing, the application fee is £90, and this is paid to the Insolvency Service. You must apply through an approved intermediary, such as a debt adviser, who will help you complete the application and check your eligibility.
Who qualifies for a DRO?
To be eligible for a DRO, you must meet the following criteria:
- You owe no more than £30,000 in qualifying debts
- You have less than £75 in spare income each month
- Your assets are worth no more than £2,000 in total
- You do not own a home
- You have lived or worked in England, Wales or Northern Ireland in the past three years
- You have not had a DRO in the last six years
It is important to note that not all debts can be included. For example, student loans, court fines and child maintenance arrears are excluded.
What happens during a DRO?
Once a DRO is approved, your debts are frozen for 12 months. During this period, you are not expected to make any payments towards the debts included, and creditors cannot take enforcement action against you. If your financial situation does not improve during this time, the debts are written off at the end of the 12 months.
However, if your circumstances change significantly and you can afford to make payments, your DRO may be revoked.
What are the consequences?
While a DRO can provide a fresh start, it is important to understand the implications. It will appear on your credit file for six years, which may make it more difficult to access credit in future. You will also need to meet certain restrictions during the DRO period, such as informing lenders or business partners about your DRO status if relevant.
That said, for many people, the benefits outweigh the drawbacks. A DRO can lift the weight of debt and provide breathing space to rebuild financially.
Speak to someone you can trust
At Adcroft Hilton Ltd, we help people find the right solution for their situation. If you think you might be eligible for a Debt Relief Order, or just want to talk through your options, our team is here to help. The earlier you get advice, the more control you can take back. Please get in touch.
