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Debt Relief Order
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Debt Relief Order

Debt Relief Order

A debt relief order gives the same outcome as bankruptcy but it is much cheaper to implement. However the qualification criteria are far stricter.

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What is a Debt Relief Order?

A Debt Relief Order (DRO) is an individual debt solution designed to help people who have few assets and will struggle to repay what they owe. I gives virtually the same outcome as going bankrupt.

Once it is in place virtually all your unsecured debt is taken away. You no longer have to make any payments to your creditors. It lasts 12 months after which you are discharged and all your debt is written off.

One of the key advantages is the low application fee which is just £90. The cost of bankruptcy is far higher.

Debt Relief Orders were introduced into the law in 2009 as a cheaper alternative to going Bankrupt.

Who can Apply for a DRO?

Not everyone can apply for a Debt Relief Order. There are 4 strict qualification criteria which must be met before you can apply.

Total debt must be below £20,000 – Increasing to £30,000 end June 2021
Your total unsecured debt must be no more than £20,000. You must include all your debts including any CCJs, benefits over payments and rent arrears.

You cannot be a Homeowner
If you are a homeowner you cannot apply for a DRO. This is the case even if your property is in negative equity. The solution is only available no people who do not own property.

Your car, if you own one, must not be worth more than £1000 – Increasing to £2,000 end June 2021
Your car should not be worth more than £1000 in total. This may not seem a lot, however remember you only have to stick with this car for a year. After that, the DRO will end and your debt written off. You can then buy a more expensive car if you wish.

Disposable Income must be £50/month or less – Increasing to £75 end June 2021
You do not necessarily have to be on a low income to qualify for a DRO. However your disposable income most be less than £50. This is the amount left over from your monthly income after all reasonable household expenses have been deducted.

The qualification criteria for a debt relief order will change at the end of June 2021.

How to get a Debt Relief Order

The Debt Relief Order application process is different to Bankruptcy. You cannot submit the application yourself. You need the help of an Approved Intermediary.

The Intermediary will first need to establish that you meet the qualification criteria. They will need a proof of all your debts (get a copy of your credit file if you are not sure who you owe money to). In addition they will need proof of your income such as wage slips and benefits statements.

They will then complete the application form on your behalf. Once your your £90 fee is paid (normally at the Post Office) the application will be submitted to the Official Receiver (OR). If you meet the criteria it is unlikely your DRO application will be refused.

One of the best places to go to get a DRO is your local Citizens Advice. However you can also approach organisations like StepChange and PayPlan.

What if your Circumstances Change during a DRO?

Once it is approved a Debt Relief Order remains in place for 12 months. This is sometimes referred to as the moratorium period. During this time if your financial circumstances improve significantly you need to tell the Official Receiver.

Your income may go up or your living expenses may fall and as a result your disposable income increases to more than £50/mth. Alternatively
you could get a windfall of more than £1000.

In these circumstances the OR may have to cancel your DRO. You will then still have to repay all the money you originally owed.

Your DRO is likely to be unaffected by minor increases in income such as an annual pay increase.

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Comments 6

  1. Charlotte

    Hi I wonder if you can help me, I recently spoke with PayPlan who advised I go bankrupt, they said the reason for this rather than a DRO is because my car is valued online (book price) at £1800, however I have now had it valued and with the amount of work that needs doing and the condition of it , it is only worth £1000. Does this mean that I actually could get a DRO and would I need to have something to prove the actual value of the car and if so what would I need?

    1. 10.12.2020

      Hi Charlotte

      If the realistic value of your vehicle is £1000 or less and you meet the other criteria for a DRO then I believe you qualify. I recommend that you call PayPlan back and explain that the initial value that you quoted them for your car was excessive.

      They may simply accept this. If not you will need something in writing so they can put it on file.

      I recommend that you value the vehicle on we by any If the value from WBAC is greater than £1000, you will probably need to get something in writing from the garage you have spoken to confirming that it is worth less due to its condition.

  2. Julia


    I have been reading that if you go bankrupt your your tax code changes at work. If this happens I am worried my employer will find out as it is only a small company… Does the same thing happen with a debt relief order?

    1. 04.12.2019

      Hi Julia

      You are right. If you go bankrupt and you are working and paying tax HMRC will change your tax code to zero until the end of the tax year (ie until the April after you go bankrupt). This means you receive more in your wages each month. The official receiver will normally require you to pay this extra to them until the following April when your tax code changes back to normal.

      Normally an employer will not question this tax change. HMRC send tax coding notices out to employers all the time. They do not give any reason for the change and they will not disclose it to the employer even if asked. That said if you work for a small employer it is possible they might ask you about it directly. You can always say you don’t know…

      The tax code change thing does not happen if you use a Debt Relief Order. You continue to pay your tax as normal. Given this, if you qualify for a DRO (see the criteria in the above article) you will not have to worry about your employer finding out. It would also be a much cheaper option for you to implement.

  3. Shelly


    I’m currently in a joint iva with my partner we are very stressed with payments going up.I’ve got a car on finance recently for 9 thousand pounds if we were to fail our iva and my partner was to go bankrupt could i go for a debt relief order for my debt less than 4 thousand and still keep my car on finance.

    1. 12.06.2019

      Hi Shelly

      Unfortunately your car will prevent you from getting a DRO. The criteria state your car cannot be worth more than £1000. This is irrespective of any finance outstanding. Given you only got it recently I suspect its second hand value is still greater than £1000.

      As such if you want to go for a DRO your only option would be hand the car back to the finance company. Then any shortfall would be added to your debt and could be included in the Order.

      If you want to keep the car this would normally be possible if you were to go bankrupt (as long as the monthly payments are reasonable and the finance company are in agreement). As such you could use this option. The outcome of bankruptcy and a DRO are basically the same. It is just the cost which is different.

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James Falla
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert
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