Debt Relief Order FAQs
When facing financial troubles it's really important to understand what options you have to help you deal with your debt.
Not all solutions are suitable for everyone, so the most important thing is to opt for the debt solution that best suits your personal circumstances.
That's why it's so important to research each solution before you determine which is best for you.
With that in mind, we've gathered together the most frequently asked questions relating to Debt Relief Orders in the hope this will help you in your quest.
Debt Relief Orders Frequently Asked Questions
Where we felt it was necessary to give a more in depth answer, we will have written a dedicated article. To read any of those articles simply follow the link where you see the highlighted phrase 'Read more'.
What is a Debt Relief Order (DRO)?
A Debt Relief Order, also known as a DRO, is an formal debt solution that assists people with total unsecured debts of less than £30,000 for those living in England and Wales, or less than £20,000 for those living in Northern Ireland and it was introduced to acts as a cheaper alternative to bankruptcy.
The DRO is a Court Order that removes the liability to the ongoing debt repayment and, on completion of the 12 month Order, renders the applicant debt free.
A DRO can only be applied for through one of a few government approved 'intermediaries'. Read more.
Back to FAQsHow does a DRO work?
A DRO removes the legal requirement for the applicant to maintain their debt repayments.
Once the DRO has been granted, the applicant is no longer liable for their unsecured debts and creditors have no legal power to enforce payment of the outstanding balances.
The DRO lasts for 12 months, after which all debts are 'written-off' and the applicant is considered legally debt free.
Back to FAQsHow long does it take to set-up a DRO?
The set-up process for a DRO is very quick. Once the intermediary has undertaken their assessment of the applicant's financial circumstances the DRO can be applied for within hours.
The financial assessment would normally be done during a telephone consultation but, for those that prefer, it can also be done face to face by one of the Citizen Advice Bureau's debt advisers.
Back to FAQsWho can qualify for a DRO?
To qualify for a DRO you must have been living in England, Wales or Northern Ireland for the last 3 years and must owe less than £30,000 for those living in England and Wales, or less than £20,000 for those living in Northern Ireland.
You must also be unable to afford no more than £75 each month towards your monthly repayments and you must not have total assets greater than £2,000 for those living in England and Wales, or £1000 for those living in Northern Ireland, with the exception of a motor vehicle with a value less than £2,000.
Back to FAQs sHow much will I pay each month?
There are no monthly payments that need to be made into a DRO.
There is a 'one-off' set-up cost of £90 which is payable to the Official Receiver. This fee is payable in all circumstances and will be charged at the beginning of the DRO process.
So long as the circumstances of the applicant do not improve during the DRO there will be no further contributions to pay.
Exceptions to this rule would be if there was an improvement in the financial circumstances of the applicant, such as if they received a financial windfall.
Back to FAQsHow long does a DRO last?
A DRO has a fixed term of 12 months.
After the 12 month term has passed, creditors are legally obliged to write-off the outstanding balances and the applicant is considered legally debt free.
Back to FAQsWill a DRO stop legal action against me?
Being a formal debt solution the DRO will immediately stop all recovery action being taken against you by your creditors.
Creditors are powerless against the strength of the DRO.
Back to FAQsDebt Relief Order or IVA?
If your personal circumstances qualify you for an IVA, then you don't actually qualify for a DRO and, equally, if your personal circumstances qualify you for a DRO, then you don't actually qualify for an IVA.
This means that you should never really be faced with this dilemma, it should be one or the other, but it's not possible for an individual to qualify for both.
Back to FAQsHow will my creditors react to my DRO?
Unfortunately for your creditors, they have no choice in the matter.
Because a DRO is a formal debt solution, they must abide by the insolvency law and accept that the debts will be subject to the Debt Relief Order.
This means that your creditors lose the right to enforce the repayment of the debt through the Courts.
Instead, they must write-off any unpaid balances at the end of the DRo term, leaving you debt free.
What is the legal position of a DRO?
A DRO is a Court Order. This means that a DRO carries the full weight of the insolvency law of England, Wales and Northern Ireland.
Back to FAQsWill a DRO affect my credit rating
Entering into a DRO will have a profound affect on an applicant's credit rating for a period of 6 years.
Back to FAQsWill I need to open a new bank account
If your bank account has an overdraft, or if you have any credit facilities with the bank providing your bank account, then you will need to open a new bank account.
If not, your bank could use its 'Right to Set-Off' the unpaid debts against any balance in your account, potentially leaving you with no money in your account to pay for your essential living costs.
Back to FAQsWhich is best DRO or bankruptcy
Yet again, it will be the personal circumstances of the individual that determines whether both options are available.
But, where the applicant qualifies for both options and both options are available, the DRO would be the least invasive and cheapest option of the two.
Back to FAQsGet A Professional Opinion
Just as you would call a doctor if you were feeling unwell, so should you call a professional debt adviser if you're experiencing financial problems.
We take debt seriously, and there's not a debt problem too big or too small for us to deal with.
So why not give us a call on 0800 088 7502 or complete this form and we'll call you.
