Making Sense Of Money

Debt Relief Order

 

A Debt Relief Order (or DRO) is a court order that can be applied for if you can’t afford to pay off your debts, which must be less than £15,000, and if you are on a low income. It will normally last just one year during which time none of your creditors will be able to take action against you to reclaim their money and after the year is up you could be debt free!

A DRO has to be applied for via the Insolvency Service but it’s a much cheaper option than bankruptcy but is not for everyone and restrictions do apply.

debt relief orderOn a personal level you have to meet the following conditions:

• You must be unable to pay your debts.

• You must owe less than £15,000.

• You can own a car to the value of £1000 but the total value of other assets must not exceed £300.

• After taking away tax, national insurance contributions and normal household expenses, your disposable income must be no more than £50 a month.

• You must be living in England or Wales, or at some time in the last 3 years have been living or carrying on business in England or Wales.

• You must not have been subject to another DRO within the last 6 years.

• You must not be involved in another formal insolvency procedure at the time you apply.

    

Only certain kinds of debts can be included within a Debt Relief Order too – these are known as “qualifying debts” and include the following:

• credit cards, overdrafts, loans.

• rent, utilities, telephone, council tax

• benefit over-payments and social fund loans.

• hire purchase or conditional sale agreements.

• buy now – pay later agreements.

If you have a hire purchase or conditional agreement you may have to return the goods bought with these loans, unless someone else can pay the instalments. You will not be able to carry on paying for the goods once you have a debt relief order.

Certain types of debt can’t be included in a debt relief order. You must pay these separately. People you owe these debts to can still take action against you, even if you have a debt relief order. These debts include:

• court fines and confiscation orders. These are fines relating to criminal activity.

• child support and maintenance.

• student loans.

You must go through a debt advisor to obtain a DRO as only an approved third party or an intermediary can apply for a debt relief order on your behalf (applications are normally online). This is normally a skilled, professional debt adviser and therefore permitted to complete the necessary forms and provide advice – they are your authorised adviser. You can find authorised advisers advertised on this debt site, at your local Citizens Advice Bureau or by visiting the Insolvency Service website at www.insolvency.gov.uk .

Debt relief orders are granted by the Insolvency Service and administered by the Official Receiver. If your DRO is granted, it will be published on the Individual Insolvency Register at www.insolvency.gov.uk. The register is open to the public and your name and address will remain on the register for fifteen months.

There is a cost of £90 to apply for a debt relief order which must be paid in cash. Whilst you can spread the cost over a six month period the Official Receiver will not be able to progress or consider your application until the £90 fee has been paid in full.

Once you have paid the fee and sent your application, the Official Receiver can make a debt relief order, providing you meet all the conditions as explained. When your debt relief order has been granted, you do not have to pay any of the creditors listed on the order. Your creditors will be informed about the debt relief order and they cannot take any action against you. You will not be able to add additional debts to this DRO.

Once the debt relief order period is finished, all the debts listed on your order will be written off and you will not have to pay them. Any debts you have which are not listed on your order will remain unpaid and you will need to make arrangements to pay them.

You can only apply for a debt relief order once every six years.

If you are considering a debt relief order it’s vital that you talk to an expert as there MAY be an alternative option that’s more suitable to your situation.

To find out more about debt relief orders visit the Citizens Advice Bureau Website >>>

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