Debt Relief Order

December 2023

Debt Relief Order In December 2023

Experiencing financial hardship can be incredibly challenging and stressful. 

The article will delve into the concept of a Debt Relief Order, a debt solution designed to help individuals manage their debts.

By understanding the intricacies of this process, individuals can determine if it is the appropriate solution for their unique financial situations.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

Understanding Debt Relief Orders

A Debt Relief Order (DRO) is a formal insolvency procedure in the UK designed to relieve individuals with few assets, low income, and unmanageable debts.

Our analysis shows that this debt solution can help eligible individuals have some or all of their qualifying debts written off. A DRO is typically managed by an authorised debt adviser, who will assess an individual’s financial situation and determine their eligibility for a DRO.

Debt relief orders are designed for those who cannot afford to repay debt and have no realistic prospect of repaying their debts within a reasonable period.

A DRO can be an alternative to more expensive options like bankruptcy or an individual voluntary arrangement. However, it is essential to consider the impact of a DRO on certain debts, your credit report, low income, and future borrowing ability before applying.

The Application Process for a DRO

To apply for a DRO, you must meet specific eligibility criteria, including having debts below a certain threshold and possessing minimal assets. An authorised debt adviser, typically from a debt advice charity, will assist you with your Debt Relief Order application.

They will gather the necessary information, verify your circumstances, and submit your application to the Insolvency Service.

The Insolvency Service will review your DRO application and decide whether to approve it. If approved, your DRO will be added to the Individual Insolvency Register, a public record. 

Providing accurate information during application is crucial to avoid complications or rejection.

Debts Included and Excluded in a DRO

A DRO covers qualifying debts, such as credit cards, personal loans, rent arrears, council tax, utility bills, and benefit overpayments.

However, certain qualifying obligations are excluded from a DRO, including court fines, child support payments, student loans, and any debts incurred due to fraudulent activity.

It is important to note that a Debt Relief Order will not cover secured debts, such as mortgages or hire purchase agreements.

A debt adviser can provide confidential advice to help you understand which debts can be included in a DRO and the best course of action to manage excluded debts.

The Impact of a DRO on Credit Rating and Future Borrowing

A Debt Relief Order can significantly impact your credit rating, as it will be recorded on your full credit report and credit reference file for six years from the date of approval.

This record may make obtaining credit, opening a basic bank account, or entering into certain financial agreements, such as rental or tenancy agreements, more challenging.

While a DRO can help you become debt-free, it is crucial to consider the long-term implications on your financial Life.

In our experience, individuals should take proactive steps to improve their credit score and manage their finances responsibly after the completion of their DRO to minimise the lasting impact on their credit rating.

The DRO Moratorium Period and Its Consequences

A Debt Relief Order typically lasts 12 months, known as the moratorium period. 

During this time, creditors listed in the DRO cannot take further action to recover the debts included in the debt relief order dro you, and you are not required to make any additional payments towards these debts.

However, there are certain restrictions during the moratorium period, such as being unable to act as a company director or obtain credit over a specific threshold without disclosing your DRO status.

Suppose you comply with all the restrictions and conditions of the DRO at the end of the moratorium period. In that case, the debts included in the bankruptcy restrictions order will be written off, and you will be considered debt-free.

However, any personal obligations excluded from the bankruptcy restrictions order by the DRO will still need to be managed and repaid.

The Role of Debt Advisers in the DRO Process

Debt advisers provide guidance and support and are crucial in the Debt Relief Order application process. They help assess your eligibility, gather the required information, and submit the DRO application on your behalf.

These advisers can offer confidential debt advice, ensuring that you understand the impact of a DRO on your circumstances and credit report.

Debt advisers can also assist in managing any excluded debts and help you create a plan for improving your financial situation post-DRO. It is essential to work closely with your debt adviser to navigate the complexities of the DRO process and ensure a successful outcome.

Debt Relief Order in Northern Ireland

Debt Relief Orders are also available in Northern Ireland, with slight differences in the application process and eligibility criteria.

In Northern Ireland, the Insolvency Service delegates the administration of DROs to a local body called the Debt Advice and Information Package (DAIP) provider. 

Individuals in Northern Ireland seeking a DRO should consult a local debt adviser for tailored guidance and support.

Alternatives to Debt Relief Orders

While a DRO can be an effective debt solution for some individuals, it is unsuitable for everyone.

Our research suggests alternative debt solutions may be more appropriate for those with higher income, assets, or debts that do not meet the DRO eligibility criteria. Some alternatives include:

Individual Voluntary Arrangement (IVA)

A legally binding agreement between you and your creditors to repay all or part of your debts over a set period.


A formal insolvency procedure that writes off most of your debts but may require you to sell certain assets to repay your creditors.

Debt Relief Order in the UK

Debt Management Plan (DMP)

An informal agreement between you and your creditors to repay your debts at a reduced rate based on your affordability.

Seeking confidential debt advice from a debt adviser can help you determine the most suitable debt solution for your unique financial situation.

Understanding Debt Relief Restrictions Orders

In some cases, individuals who have been dishonest or have not cooperated during the DRO process may be subject to a Debt Relief Restrictions Order (DRRO) or a Debt Relief Restrictions Undertaking (DRRU).

These orders or undertakings can extend the debt relief restrictions order placed on an individual during the DRO moratorium period for up to 15 years.

It is vital to be transparent and cooperative during the DRO process to avoid imposing such restrictions, which can have a long-lasting impact on your financial Life.

The Effects of a DRO on Hire Purchase and Conditional Sale Agreements

Hire purchase and conditional sale agreements are excluded from Debt Relief Orders, meaning the debts associated with these hire purchase or conditional sale agreements buy and show arrangements will not be written off.

If you have a hire purchase or conditional sale agreement, you may need to continue making payments or risk losing the asset.

It is essential to discuss your situation with a debt adviser who can provide guidance on managing these types of debts alongside a DRO and help you explore potential alternatives or solutions.

"Experiencing financial hardship can be incredibly challenging and stressful."

Managing Bank Accounts and Household Bills during a DRO

During the DRO period, you may face challenges with managing your bank account, as some banks may freeze or close accounts when a DRO is approved.

Opening a basic bank account before applying for a DRO is advisable, as these accounts typically have fewer restrictions and are less likely to be affected.

You will still need to manage your household bills, such as utility bills and council tax, during the DRO process. It is crucial to budget for these expenses, as they are not included in the DRO and must be paid separately.

A debt adviser can help you create a budget that accounts for your household expenses and any excluded debts to maintain financial stability during and after the DRO process.

Managing Income Tax and National Insurance Arrears in a DRO

Income tax and national insurance arrears are considered qualifying debts and can be included in a Debt Relief Order.

However, during the DRO period, you must continue paying your ongoing income tax and national insurance contributions, as the DRO does not cover these debt repayments.

To stay on track with your financial obligations, it is essential to budget for your ongoing tax and national insurance payments while adhering to the DRO restrictions. 

In our experience, seeking advice from a debt adviser can help you navigate this aspect of the DRO process.

Understanding Debt Relief Orders

Impact of a DRO on Criminal or Civil Action and Magistrates Court Fines

A Debt Relief Order does not cover criminal or civil action debts or magistrates court fines. These are considered excluded debts and must be managed separately from the DRO.

If you have any such debts, it is crucial to seek advice from a debt adviser to understand your options for addressing these obligations.

Premium Bonds, Crisis Loans, and Benefit Overpayments

Premium bonds and crisis loans are excluded from a DRO; you must manage these debts separately. Benefit overpayments, however, can be included as qualifying debts in a Debt Relief Order.

If you have a mix of these debts, discussing your specific circumstances with a debt adviser is essential to understand how a DRO might affect each type of debt.

Preparing for Life after a Debt Relief Order

Once your DRO period is complete and your qualifying debts are written off, focusing on rebuilding your financial stability is essential.

In our experience, individuals should consider creating a budget, establishing an emergency fund, and learning about credit-building strategies to improve their credit scores.

Debt charities can provide valuable advice and support to help you manage your finances effectively after a DRO, ensuring you maintain a positive financial trajectory and avoid falling back into unmanageable debt.

By adopting responsible financial habits and debt, charities can work towards a stable financial future and prevent the need for other debt solutions.

Addressing All the Debts and Creditors’

All debts and creditors must be listed accurately when applying for a Debt Relief Order. If you include all pertinent information called qualifying debts, your DRO may be complete, leaving you guilty of the omitted debts.

Working closely with a debt counsellor can assist you in compiling an exhaustive list of your debts, ensuring that your application accurately reflects your financial situation and all the debts and creditors involved.

Considering Lump Sum Payments and Spare Income

There may be better options than DRO for individuals with disposable income or a large sum available. In such circumstances, alternative debt relief options, such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP), may be preferable.

Depending on your capacity, these options permit you to make regular or one-time payments towards your debts. 

A debt counsellor can help you determine the optimal course of action based on your current financial situation and available resources.

The Impact of a DRO on Tenancy and Rental Agreements

A Debt Relief Order can impact your tenancy or rental agreement because landlords may view a DRO negatively when evaluating your creditworthiness.

Being forthright with your landlord regarding your financial situation and the potential consequences of a DRO is essential. Sometimes, a landlord may be prepared to negotiate the terms of your rental or tenancy agreement to suit your needs.

The Role of Debt Advisers in the DRO Process

Debt Relief Orders and Limited Companies

A DRO may affect your capacity to manage the business if you are a director or shareholder of a limited liability company. Even though a DRO does not directly influence the company’s finances, it does restrict your financial activities.

For instance, while under a DRO, you cannot serve as a director of a limited company, and you must disclose your DRO status if you desire to obtain credit for the company. 

It is essential to consider these restrictions when determining whether a DRO is suitable for your situation.

Understanding the DRO Fee and Bankruptcy Fees

A one-time, non-refundable DRO fee is required when applying for a Debt Relief Order. This fee covers order processing and administration expenses. 

In contrast, the prices associated with bankruptcy fees and filing for bankruptcy are typically higher, including both court costs and the cost of administering the bankruptcy.

When deciding which debt solution is most suitable for your financial situation, it is crucial to consider the costs associated with each option.

A debt consultant can assist you in weighing the advantages and disadvantages of each option, taking into account the associated fees and the long-term impact on your credit history and credit file.

Asset Valuation in Debt Relief Orders

When applying for a DRO, you must disclose the total value of your assets, worth your property, vehicles, and personal possessions.

To qualify for a DRO, the total value of your assets must be below a certain threshold. Accurately estimating your assets’ value is crucial to ensure your eligibility for a DRO.

A debt consultant can assist you in determining the worth of your assets and guide you through the DRO application process. You can avoid potential problems and ensure a successful application by accurately listing your assets and their value.

Debt Relief Restriction Order and Its Implications

In some instances, individuals who have obtained a Debt Relief Order (DRO) may be subject to a Debt Relief Restriction Order (DRRO). Typically, a DRRO can extend the restrictions imposed on an individual a DRO for two to fifteen years.

Typically, this order is issued when there is evidence of dishonesty or irresponsibility in the individual’s financial dealings. 

If you are concerned about the possibility of a DRRO being imposed on you, you must comprehend the ramifications of a DRRO and seek advice from a debt adviser.

Managing Loans Arrears and DRO Debts

When applying for a Debt Relief Order, list all your outstanding debts, including loan and rent arrears and other DRO obligations. 

This ensures that all your creditors know your DRO application and that further payments on your debts are effectively managed.

By collaborating with a debt counsellor, you can ensure that all your outstanding debts are listed accurately on your DRO application, giving you the best chance of achieving a positive result and a fresh financial start.

Navigating Tenancy Agreements and Credit Records during a DRO

A Debt Relief Order can impact your tenancy agreement and credit history, making it more difficult to find rental housing in the future.

It is crucial to discuss your financial situation and the implications of a DRO with your landlord, as they may be willing to negotiate the terms of your tenancy agreement.

In addition, it is essential to take proactive measures to reestablish your credit history following the conclusion of your DRO, such as maintaining a basic bank account and making on-time payments for any ongoing financial obligations.

Understanding the Value of Assets and Conditional Sale Agreements

When applying for a DRO, it is essential to accurately assess the value of your assets and consider any conditional sale agreements.

Typically, conditional sale agreements involve purchasing products on credit, with ownership transferring to the buyer upon completion of all payments. If you have a conditional sale agreement, your eligibility for a DRO may be affected.

By collaborating with a debt adviser, you can determine the value of your assets and evaluate how any purchase or conditional sale of agreements may impact your DRO application, allowing you to make informed decisions about your financial future.

Meet the author

Jane Parkinson

Jane Parkinson

Jane is one of our primary content writers and specialises in elder care. She has a degree in English language and literature from Manchester University and has been writing and reviewing products for a number of years.

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Frequently Asked Questions

How does a DRO affect all the creditors?

A Debt Relief Order (DRO) affects all your creditors by placing a temporary hold on all your outstanding debts. Once the DRO is granted, creditors are legally required to cease all debt-related actions and communications for the duration of the DRO. This allows all the creditors to address your financial situation and regain financial control.

Can I make a lump sum payment during a DRO?

It is not recommended to make lump-sum payments to your creditors while in a DRO, as doing so could compromise the success of your DRO application or result in its cancellation. A DRO is designed for people with limited disposable income and few assets. Any significant lump-sum payments may indicate that you have more resources than you initially disclosed, potentially disqualifying you from the DRO process.

How does a DRO affect my credit record?

A Debt Relief Order can significantly impact your credit score, as it stays on your credit report for six years after it is granted. This may impede your ability to obtain future credit, financing, or mortgages. However, once the DRO period has expired, you can begin to rehabilitate your credit history by responsibly managing your finances and meeting your ongoing financial obligations.

Are conditional sale agreements included in a DRO?

Typically, a DRO does not include conditional sale agreements, in which you consent to purchase an item on credit and acquire ownership once all payments have been made. If you fail to maintain the agreed-upon payments, the creditor may repossess the item if you have a conditional sale agreement. It is essential to discuss any conditional sale agreements with a debt counsellor to determine how they may impact your DRO application and ongoing financial obligations.

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