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If you would like to know more about a debt relief order, here is a quick, simple guide to the main facts.

1. What is a debt relief order?

A debt relief order (DRO) is an order granted by the Insolvency Service in cases where you can’t afford to pay off debts.

With a debt relief order, none of the companies to which you owe money (your creditors) can take action against you to get their money back.  This lasts for as long as you have the DRO, which is usually about a year.

At the end of this time, all the debts included in your order are written off.

To apply for a debt relief order, you must have debts of less than £15,000 and a low income.  As you cannot apply for a DRO yourself, you will need to contact an authorised adviser who will apply for a DRO on your behalf.  First though, your adviser will check whether you meet the conditions. For example, you won’t be able to apply for a DRO if yoAu own things of value or have savings of over £300.

To proceed with an order will cost £90, but you can spread the cost of this over six months.

To find out more details about a debt relief order, please read on.  Please note that a debt relief order is a cheaper option than going bankrupt, but there may be more ways to deal with your debts and your authorised adviser can provide further information about these other options.

2. Who can apply for a debt relief order?

Your authorised adviser will check your details to see if you meet the conditions to apply for a DRO. These are:

  • you have qualifying debts of £15,000 or less (see below for what counts as a qualifying debt)
  • you have £50 or less a month of spare income after paying all your normal household bills
  • you own things of value or savings worth £300 or less
  • your motor vehicle, if you own one, is worth £1,000 or less (unless you have a physical disability and it has been specially adapted)
  • you have lived, had a property or carried on a business in England or Wales in the last three years.

3. What is a qualifying debt?

Not all debts can be included in a debt relief order. Only certain types of debts qualify such as:

  • credit cards, overdrafts and loans
  • rent, utilities, telephone and council tax
  • benefit overpayments and social fund loans
  • hire purchase or conditional sale agreements
  • buy now-pay later agreements.

(Once you have a DRO you will not be able to pay for goods brought with a hire purchase or conditional sale agreement.  So unless someone else pays the instalments, you may have to return the goods.)

Although a DRO can include many different kinds of debt, there are certain types which cannot be included such as:

  • court fines and confiscation order
  • child support and maintenance
  • student loans

4. Spare income of £50 or less

To apply for a debt relief order, you need to meet certain conditions.  One of these is that the amount of spare income you have each month - that’s after all your household outgoings - is £50 or less.

Your adviser will be able to help you take into account all the money coming into your household including things like your salary or wages, your benefit payments (like Jobseeker’s Allowance, for example), your pension, contributions from other members of your household and any rental income etc.

Once you’ve paid all your normal bills, if the figure left over is £50 or less, you may be able to apply for a DRO if you meet the other conditions.

5. Your assets

Another condition of the debt relief order is that you don’t own things of value (your assets)

worth more than £300.  When you add up the value of your assets, there are some things you don’t need to include such as:

  • household equipment and item ie furniture, bedding and clothing
  • items like books, tools or equipment used for your job
  • your motor vehicle - but only if it is worth less than £1,000
  • a car which has been adapted because you have a physical disability.

Things which count as assets include any savings or shares you have, antiques and property. So if you own your property or have a mortgage on it, for example, it’s unlikely you would be able to apply for DRO.

Also, if you are currently working but have a private or occupational pension fund, this counts towards the £300 limit. (If you have already retired and receive payments from your pension fund, this is viewed as income rather than an asset.)

If you have any queries regarding the value of your assets, ask your authorised adviser.

6. Who cannot get a debt relief order

There are some things which may prevent you from getting a debt relief order.  These include:

  • if you are currently bankrupt
  • if you have an Individual Voluntary Arrangement (IVA) or are applying for an IVA
  • if the companies you owe money to (your creditors) have applied to make you bankrupt but the hearing hasn’t taken place. (If your creditors agree however, you may still be able to apply for a DRO.)
  • if you have been given a Bankruptcy Restrictions Order or Undertaking
  • if you have petitioned for bankruptcy but your petition has not been dealt with to date - unless the judge has referred you for a debt relief order instead.
  • if you have already had a debt relief order in the last six years
  • if you have been given a Debt Relief Restriction Order or Undertaking.

For more details on whether you can get a debt relief order, ask your authorised adviser.

7. How to apply for a debt relief order

Only an approved third party or an intermediary can apply online for a debt relief order on your behalf.  This is usually someone who is a skilled debt adviser and has been given permission to complete the necessary forms and give advice -  they are an authorised adviser.

You can find authorised advisers 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.  This fee must be paid in cash at a Payzone outlet. (Visit www.payzone.co.uk for a list of outlets.) You can spread the cost over a six month period but the Official Receiver will not 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.  (It is important to note that it is an offence to give false or misleading information on your application.)

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.

For further information, ask your authorised debt advisor.

8. Things you must not do before you apply and during a debt relief order

Before you apply for a debt relief order and during the debt relief order, there are certain things you must not do. These include:

  • hiding, destroying or faking any information, books or documents up to one year before you apply for a DRO and during the length of the DRO
  • failing to tell the Official Receiver of any change in your circumstances that would affect your application for a DRO between applying and the order being granted
  • giving away or selling things of value for less than they are really worth to help you qualify for a DRO.

It is an offence to do any of these things and, if found guilty, the Official Receiver may refuse to grant you a debt relief order.  In more serious cases, you could be prosecuted and fined, sent to prison or both. If you have already been granted a debt relief order, the Official Receiver might apply for a Debt Relief Restriction Order, or take your DRO away.

(If you didn’t intend to defraud anyone or hide information, you will not be found guilty of an offence.)

Also, for the period of the debt relief order, you cannot:

  • get credit over for over £500 without telling the lender you have a debt relief order
  • carry on a business under a different name from the one on which you were granted a debt relief order, without telling everyone involved with your business the name under which you were granted your debt relief order
  • be involved with promoting, managing or setting up a limited company, without getting permission from court.  You also cannot act as a company director without getting permission from court.

If you do not comply with the conditions of the debt relief order, or the Official Receiver believes you have provided wrong information or been dishonest, they can apply for a Debt Relief Restriction Order. If you are given Debt Relief Restriction Order, it means the restrictions on the things that you can do remain in place from two to fifteen years.

(This will not affect your debt relief order which will still end after twelve months and the debts included in the order will still be written off).

However, if you fail to follow the restrictions, you will be committing an offence.  This could lead to a fine or imprisonment.

If you have any queries about things you must not do before and during a debt relief order, ask your authorised debt adviser.

9. Changes to your circumstances

If there are any changes to your circumstances during the period of your debt relief order, you must remember to inform the Official Receiver.  Changes include things such as:

  • information which you have given but realise is incorrect or has been missed out when you applied for the DRO
  • any increase to your income
  • any additional money or valuables acquired by you  - like, for example, money left to you in a will.

If you do not tell the Official Receiver about a change in circumstances, you could be committing an offence and it might lead to your debt relief order being taken away from you.  You would then have to make arrangements to pay all the creditors included on the order.

10. After the debt relief order finishes...

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.

Your local Citizens Advice Bureau or authorised adviser will be able to provide further information about debt relief orders.

Debtrelieforder.co.uk offers confidential and non-judgmental advice and will put you in touch with a licensed professional to arrange your debt solution. Please note that failure to adhere to a debt solution could result in further financial problems. Please note that whilst initial advice is free, fees may be payable depending on the solution provided. Please note that your home may be repossessed if you do not keep up with repayments on a mortgage or secured loan.

It is important that you find the right solution for your circumstances. You can also view free publications from Insolvency Service which provides an overview of some of the debt solutions that may be available.

Other Options To Consider

Remember there are some companies who offer quick fixes to your cash problems if you really are desperate to borrow some money.

Sameday money compare the market for payday loans and can be useful if you are really struggling for cash. Although remember that you can incur significantly more charges if you fail to keep up with repayments.