What is a Debt Relief Order?
What is a debt relief order?
A Debt Relief Order (DRO) is a form of debt relief available to people in England, Wales, and Northern Ireland who have a low income, few assets, and relatively low debts. It is a way to help people who are struggling to repay their debts to get a fresh start.
A DRO is a legal agreement between you and your creditors that allows you to make reduced payments on your debts for a specified period of time, usually 12 months. After this period, your debts will be discharged, meaning you will no longer be responsible for paying them.
To qualify for a DRO, you must have less than £50 per month disposable income, less than £1,000 worth of assets, and debts of less than £20,000. You must also not own your own home and not have had a DRO in the past six years.
A DRO is not suitable for everyone, and it is important to seek professional advice before applying for one. It is also important to understand that a DRO will have a negative impact on your credit rating and may affect your ability to obtain credit in the future.
What types of debt are included in a debt relief order?
Not all types of debts can be included in a Debt Relief Order (DRO). Only certain types of debts are eligible for inclusion in a DRO. The types of debts that can be included in a DRO are:
- Credit card debts
- Overdrafts
- Loans (including payday loans)
- Store cards
- Catalogue debts
- Utility bill arrears
- Rent arrears
- Council tax arrears
- Benefit over-payments
However, there are certain types of debts that cannot be included in a DRO. These include:
- Secured debts such as mortgages and car loans
- Student loans
- Court fines and penalties
- Child support or maintenance payments
- Debts incurred through fraud or misrepresentation
It is important to note that a DRO will not write off all of your debts, and there may still be some debts that you will need to continue to pay after the DRO has been approved.
Can a debt relief order be refused?
Yes, it is possible to be refused a Debt Relief Order (DRO) if you do not meet the eligibility criteria or if your application contains errors or inaccuracies.
To qualify for a DRO, you must meet the following eligibility criteria:
- You must have debts of less than £20,000
- You must have less than £50 per month disposable income
- You must have less than £1,000 worth of assets
- You must not own your own home
- You must not have had a DRO in the past six years
If you do not meet these criteria, your application for a DRO may be refused. Additionally, if your application contains errors or inaccuracies, it may be rejected. This is why it is important to seek professional advice before applying for a DRO and to ensure that your application is completed accurately and truthfully.
If your application for a DRO is refused, you may be able to explore other debt relief options, such as an Individual Voluntary Arrangement (IVA) or bankruptcy. It is important to seek professional advice to determine the best course of action for your individual circumstances.
How to apply for a debt relief order?
To apply for a Debt Relief Order (DRO), you will need to follow these steps:
Seek advice: Before applying for a DRO, it is important to seek advice from a debt advisor who can help you understand whether a DRO is the best option for your situation. We offer a free initial consultation and can advise on this.
Complete the eligibility assessment: You can complete an eligibility assessment online or with the help of a debt advisor to determine whether you meet the eligibility criteria for a DRO.
Gather the required information: To apply for a DRO, you will need to provide information about your income, expenses, assets, and debts. You will also need to provide evidence of your income and debts.
Complete the application form: Once you have gathered all the required information, you can complete the application form. The form can be completed online or on paper and must be submitted to the Insolvency Service.
Pay the fee: There is a fee of £90 to apply for a DRO. You may be able to get help with this fee if you are on certain benefits.
Wait for a decision: The Insolvency Service will review your application and make a decision on whether to grant the DRO. This usually takes around eight weeks.
If your DRO is approved, your creditors will be notified, and you will no longer have to make payments on the debts included in the DRO. After 12 months, your debts will be discharged, meaning you will no longer be responsible for paying them.
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