The Debt Relief Order (DRO) was introduced in April 2009 as a legal alternative to Bankruptcy for those with lower debt levels. It is a type of personal insolvency.
You can apply for a DRO if you do not own your own home, have little disposable income and can not realistically see your situation improving.
A DRO is issued by the Official Receiver (OR) who is an officer of the Bankruptcy Court. The OR will write to your creditors to explain:
- They can not take any action to recover their money without the permission of the court
- You are not able to make any payments towards your debts
- You will be discharged (freed) from your debts when the DRO ends, usually after twelve months. However a DRO can be amended or cancelled if your financial situation improves during the 12 month period.
In order to qualify for a DRO you must:
- Owe less that £20000 to your creditors
- Have less than £50 a month disposable income. This is the amount left after you have paid all your outgoings each month such as rent, utilities, council tax, food, clothing and petrol etc.
- Have less than £1000 worth of assets; you can own a motor vehicle valued at no more than £1000.
- You must not have been subject to another DRO within the previous 6 years.
- You must not be involved in another formal insolvency procedure at the time you apply.
- You must pay a small administration fee of currently £90
You must tell your bank or building society that you have a DRO, they can decide if you can continue to use your accounts. It is a criminal activity to break any of the following DRO restrictions:
- Borrow more than £500 without telling the lender about the DRO
- Act as a director of a company
- Create, manage or promote a company without the courts permission
- Manage a business with telling those you do business with about your DRO
- Work as an Insolvency Practitioner (an authorised debt specialist.)
You can contact your local citizens advice bureau (CAB) or other licensed DRO intermediaries who will be able to help you if you feel a DRO may be suitable for you. They will be able to advise you regarding the online application process and any fees which you will need to pay.