Debt Relief Orders (DROs) – everything you wanted to know but were afraid to ask

posted by in Debt

20130131_144002Statistics released today revealed that the number of people applying for DROs is higher than bankruptcy. Even though they’re increasing in popularity they’re still not as well-known as their insolvency brothers, IVA and bankruptcy.

What is a DRO?

DROs are often referred to as a form of “mini bankruptcy”, which isn’t too far from the truth. Like bankruptcy, it’s a way to get debts written off through the court system when you can’t afford to pay them back.

DROs are only available in England, Wales and Northern Ireland. Go to our debt advice in Scotland page to find out about debt solutions available if you live there.

If you meet the criteria then you’ll be placed into a 12 month ‘moratorium period’ (a fancy way of saying ‘waiting time’). During this year your debts will still exist but the courts will notify your creditors of the DRO, so you’ll not have to make payments to your creditors and they won’t be pestering you with letters and phone calls.

If your situation hasn’t improved by the end of the 12-month period you’ll be discharged from the DRO (a fancy way of saying that it’s ended) and your debts are written off.

What are the criteria?

To apply for a DRO you need to meet the following criteria:

  • You have to have under £50 per month available after paying essential living costs
  • You must have under £300 in personal assets (not including your car)
  • If you have a car if must be worth £1000 or less
  • Your debts must be under £20,000 in England and Wales and £15,000 in Northern Ireland

How do I know if I’ve under a £50 a month spare?

We can help you work this out! If you contact us for advice we’ll plan a monthly income and expenditure budget which will show what you’ve got coming in and what you need to live off (not including debt payments or luxuries). By taking your outgoings away from your incomings we’ll know what’s left.

What’s classed as an asset in a DRO?

Basically as asset is something that you own that could be sold to raise money. It doesn’t include day-to-day things like clothes or furniture. It’s more things that are worth a bit, so if you’ve got a brand new 60-inch LED TV then you might not qualify for a DRO.

What debts are included?

Credit cards, overdrafts, loans and any other kind of unsecured credit debts are included in a DRO – the kind of stuff folk most expect. However it’s often a surprise to people that arrears on household bills, benefit overpayments and items bought on finance are also included.

What about the fees?

The fee for a DRO is £90 and is paid just before your application is submitted to the Insolvency Service. If you apply for your DRO through us we’ll send you a letter with a barcode on, which can be used to load up payments at local shops with PayZone facilities.

You can pay the £90 in instalments but will only be able to apply for your DRO once your payments add up to the total amount.

Who can help me apply?

We can! We’re an ‘approved intermediary’ for DROs. We can put together an application with you and submit it to the Insolvency Service on your behalf.

Before doing any of this we’ll want to make sure a DRO is right for you, so we’ll look at your finances and advise you on all the options. So if you’re interested in a DRO get in touch with us. You can do this online using our advice tool Debt Remedy or by giving us a call.

What happens if my situation changes?

If your finances change during a DRO notify the Insolvency Service and your situation will be reassessed. If you still meet the criteria your DRO will carry on; if you’ve had an improvement in your finances that means you don’t meet the criteria then your DRO will end and you’ll be back to paying your debts (but bear in mind that you should be better placed to deal with the debts).

 Will it affect my credit rating?

It’s a big “yes” for this one. As with bankruptcy a DRO will make your credit rating pretty rubbish for six years. So even after your DRO has been discharged it’ll still be hard to get credit. However most people who’ve got to the point of doing a DRO aren’t interested in ever getting credit again anyway!

At StepChange Debt Charity we want you to be free of debt and save money.

Written by

Tags Debt
  • moneyaware

    Hello,

    It would depend on the situation. I wouldn’t expect them to dig too far back due to how busy they are. But on the otherhand, if they suspected something was fishy they’d be more likely to dig deeper.

    Cheers

    James

  • Charw321

    Applied for a DRO 2 years ago so have been free of the moratorium period for 12 months, no creditors are contacting me but one of them is still listed on my credit report as having a large balance outstanding i.e. they haven’t updated the balance to “satisfied” and are unwilling to do so unless I provide them with a certificate of completion or a discharge certificate which you obviously don’t get with a DRO.

    Are there any legal guidance notes that I can send to them which will back me up when I tell them that they must update my credit report?

    Thanks

    • moneyaware

      Hello,

      James Jones from Experian dealt with a very similar answer on his Q&A page which I think applies to your situation too. http://www.experian.co.uk/consumer/questions/askjames361.html

      The reply from James Jones says that If they won’t update your record then you should make a complaint to the company. If they still don’t update your file then you could ask the Financial Ombudsman Service to investigate.

      I hope this helps.

      James

  • moneyaware

    Hi there Adam,

    One of the criteria for a DRO is that you have to have assets of under £300. If you get a compensation payout during the course a DRO’s “moratorium” period – the 12 months following your application being accepted – then it’s likely you’ll no longer meet the criteria of the DRO so it would be cancelled.

    So a compensation payment could impact on a DRO. I’m not sure how a DRO would impact on a compensation payment though – that would be something to take up with the people handling your claim maybe.

    Kind regards

    James

  • Babe

    Hello. I am currently in the “waiting” period of my DRO. Since I applied my partner has moved in with me and now have another child. I still receive benefits but obviously slighter more, however, I am spending more too. What does this mean for my application? what happens at the end of my DRO. Is there another interview where they ask my income and expenses? Will they say that I get more money now so will have to pay back? It’s all so confusing? Please help

    • moneyaware

      Hello there,

      Thanks for getting in touch.

      If your circumstances change during the waiting period of your DRO you will need to let the OR (Official Receiver) know. They’ll want to know about your current income and outgoings and there’s a possibility that your DRO could be revoked if they think you now have more than £50 a month available for debts. You mention that your living costs have gone up alongside your income, so it may work out that your overall position hasn’t changed and you can continue on your DRO.

      Keep a copy of the letter safe and send it on a recorded service so you have proof that it’s been received.

      If you’d like more information about this we have a DRO guide that you might find useful. You can find it here (page 9 covers changes in circumstances).

      http://www.stepchange.org/Portals/0/documents/info/stepchange-DRO-guide.pdf

      I hope this helps,

      Jen

  • Clare Garcia

    Hi My DRO was discharged in January 2013, however some of the debtors are refusing to show the account as settled/satisfied?? And some of the debtors have knowingly sold the discharged debts and I now have other companies harassing me and showing the debt on my credit report as a current default on my credit file??
    Please help, the insolvency service have said the companies that have bought the debt have no legal recourse to recover the debt but how do I get it off my file??
    For example;
    Vodafone 1800, showing as settled/satisfied…..sold to Lowell who now appear on my credit file showing a current default of 1800?? aaaargh

    • moneyaware

      Hi Clare,

      I’d suggest making a complaint directly to the companies involved. They’ll investigate and have to give you a response, which I’d hope would involve updating your credit report to accurately reflect what’s gone on.

      There’s some really useful guidance available on the Information Commissioner’s Office’s website: https://ico.org.uk/for-the-public/raising-concerns/. If you need any further help I’d suggest calling their helpline.

      Kind regards

      James

  • marie major

    Hi I am living with my daughter in her house as I had to sell my house due to long term illness. The only income I have is my benefit. But will they take my daughters money into account? I have been trying to pay off my debts since my illness 4 years ago.

    • moneyaware

      Hi Marie,

      Thanks for your message. It would depend on the type of benefit you’re receiving, but I’d expect that your daughter’s income wouldn’t affect what you’re entitled to. For example, if you receive employment support allowance, this is only calculated based on your own personal circumstances.

      Your local council will have benefits advisor who will be able to provide more information about the benefits you’re entitled to and the sort of things that would affect it.

      Kind regards,

      Laura

  • Thomas

    Hi All,

    I am about to apply for a DRO. My car is worth just about 1000, dealer price is more than that, but private price is just under 1000. What price is considered in the application?

    Thanks

    • moneyaware

      Hi Thomas,

      When you apply for a DRO, your assets must be less than £300 with the addition of a car with a value of up to £1000.

      Usually, the price considered in the application will reflect the overall value of the car. So if you were to sell your car through a dealer and they
      valued it at more than £1000, this is the price we’d imagine would be taken into account. If you were to sell the car privately, at a lower price, the car will still be considered to be worth more if it can be sold for more elsewhere.

      I hope this helps,

      Jen

  • moneyaware

    Hi there,

    We’d suggest speaking to whoever helped deal with your debt relief order (DRO) so that they can offer you some more advice.

    Hopefully this will help solve any problems you’ve been having.

    Rory

  • AA

    can I ask if you have previously been bankrupt, (which was discharged 10 years ago) are you still eligible for a DRO?

    • moneyaware

      Hi there, thank you for getting in touch.

      Your previous bankruptcy should not prevent you from applying
      for a DRO because you’ve since been discharged. With that said, before you apply for a DRO, we would recommend that you first get in touch with us for some free and confidential debt advice. We can have a look at your whole situation and will be able to tell you what the best option might be for you.

      Our online advice tool Debt Remedy can help you put together a personal action plan in just 20 minutes: http://www.stepchange.org/debtremedy.aspx?domain=www.MoneyAware.co.uk

      Alternatively, you can speak to one of our friendly advisors by visiting our contact us page: http://www.stepchange.org/Contactus.aspx

      Kind regards

      Rachel

  • Elaine Leeming Lilac Lowe

    I took out a DRO 3 years ago,but I ended up dating a conman,who turned out to be a Heroin addict too :/ He took out all sorts in my name and stole from me.The Police let me down and now I am taking out a civil claim against them.Would I be eligible to take out a second DRO?My debt advisor from Citizen Advice also left out a debt of £1000 and more to Provident and when I complained he told me,I hadn’t given it to him and would have to offer to pay them a pound a month?
    I am exhausted with all this,being so let down and so gullible.
    I am already classed as vulnerable.

    • moneyaware

      Hi there Elaine,

      Thanks for getting in touch with us and I’m very sorry to hear
      of what you’ve been dealing with.

      There’s a time period of 6 years between when you applied for a
      DRO and when you’ll be able to apply for another. From what you’ve told us, I think it would be a really good idea for you to get in touch and see what options are available to you. Our Helpline number is 0800 138 1111 and we’re open Mon – Fri 8am to 8pm and Sat 8am to 4pm.

      Kind regards

      Rachel

      • Elaine Leeming Lilac Lowe

        Ah thank you for answering this for me :)

  • vicky

    Does DRO valid in all EU countries ? Thanks , Vicky

    • moneyaware

      Hi Vicky, thanks for posting.

      Only England, Wales and Northern Ireland residents can be considered for a DRO, and it would only apply to UK debts. If you live abroad but have UK based debts for which you need free and confidential advice, you can contact our Helpline on +44 113 297 0126. We’re open Mon – Fria 8am to 8pm UK time and Sat 8am to 4pm UK
      time.

      Kind regards

      Rachel

  • lilly

    i am currently applying for a DRO, just waiting for the part to pay the money with.
    I have possibly found a house exchange through my housing association, but the move will likely not happen until just after xmas.
    is moving whilst in the first year of a DRO ok?
    would I be ok to get a social fund loan to pay for moving costs or should I ask friends to help?

    • moneyaware

      Hi Lilly,

      Thanks for posting.

      It’d be hard to know for certain if you’d be able to take out a social fund loan without knowing more about the situation.

      It’s probably best to check with the company dealing with your DRO application. They
      should be able to give you a more specific answer.

      Kind regards,

      Jen

  • Oakenmists

    Can you pay so much of your debt off with a DRO and set up a plan for some other debts if you have more than 15k or would you have to go bankrupt? thanks

    • moneyaware

      Hi there,

      To qualify for a DRO you must have unsecured debts of less than £20,000 if you live in England or Wales or less than £15,000 if you live in Northern Ireland. The amount used to be £15,000 in England and Wales too however this was recently changed and I’ve updated the blogpost to reflect this.

      If a DRO is the right debt solution for you, you wouldn’t be able to exclude debts that could be included just because they take you over the qualifying amount.

      If you have debts over £20,000 you wouldn’t be able to apply for a DRO however there may be other debt solutions better suited to you. If you’d like to get some free debt advice, please feel free to give our Helpline a call. Our advisors will be able to let you know if any debt solutions are suited to your situation.

      You can find out how to get in touch with us here:

      http://www.stepchange.org/Contactus.aspx

      Kind regards,

      Jen

  • Fay Santo

    I did a dro a year ago, and am now past the twelve month period, how do I know when it’s finished, will they write to me saying so, or do I just wait and see if the creditors contact me?

    • moneyaware

      Hi Fay,

      Thanks for getting in touch.

      A DRO will usually last for 12 months. You don’t receive notification that a DRO has ended, it usually finishes 12 months after the date it started unless you’ve been told otherwise.

      I hope this helps,

      Jen

  • Sarah

    Hi I’m wondering if this is the best thing for me to do. But I am worried. Both my partner and I are now unemployed. I am using credit cards to buy shopping and pay rent etc. My credit cards are all maxed out now (10,000). I also have a car loan that has 4 years left to pay off. Some may say if you cant pay your debts you shouldn’t have a car. However for me to stand a better chance of getting a job do I have to include the car loan in the dro if I apply for one?

    • moneyaware

      Hi Sarah,

      Obviously I don’t know all the details of your situation, but it wouldn’t usually be possible to do a DRO and keep making payments to a car loan.

      I’d suggest giving our Helpline a call and getting free advice about all the possible debt solutions available, including DROs.

      Here’s our contact details: http://www.stepchange.org/Contactus.aspx.

      Kind regards

      James

  • Harriet

    Hi, I had a debt relief order over 7 years ago and I’ve been trying to apply for a 5% mortgage. I have been refused and they seem to think it was because of this. I have no outstanding debt, pay all my bills and credit cards on time. I don’t understand why this should still be affecting me. If anyone has any advice that would be great, as everything i have found states it comes off after 6 years.

    • moneyaware

      Hi Harriet,

      I can’t see how a potential lender would know about a past debt relief order (DRO) if it’s no longer showing on your credit history.

      There are a wide variety of reasons lenders decline mortgage applications and they’re often a bit vague when you ask them to ellaborate on their decisions.

      If you’ve not seen your credit history lately then it might be worth checking it out to see if there’s anything that stands out as an obvious issue.

      Noddle provide free access to your credit file via the Call Credit reference agency, here’s the link: https://www.noddle.co.uk/.

      Kind regards

      James

  • moneyaware

    Hi Elaine,

    Thanks for posting.

    Benefits overpayments are usually included in DROs unless they were due to fraud.

    As it seems like you’ve already been to court over this, you could make a complaint and provide evidence that the court has previously decided in your favour.

    As our expertise is in helping people deal with their debts, we’d be unable to help you dispute whether you owe a debt. However you might find it beneficial to get in touch with your local Citizen’s Advice Bureau, they may be able to give you more specific advice:

    https://www.citizensadvice.org.uk/

    I hope this helps,

    Jen

    • Elaine

      Thanks. I’m gonna go to the C.A.B tomorrow

  • Andrew

    I have been on a DRO 2 years ago so I am past my Moratorium period. I have a potential windfall due to a mis-sold financial product from before the DRO, will this have any affect on the DRO? I don’t want it to affect the DRO.

    • moneyaware

      Hi Andrew,

      As long as there were no DRO restrictions placed on you (which you’ll have been made well aware of) then once the DRO has completed there’s no reason why you can’t keep any money you receive.

      Unlike bankruptcy, the official receiver (OR) does not vest any interest in your assets therefore you are able to keep any money you receive after the DRO has ended.

      I hope this helps, good news on the windfall too.

      Rory

  • Amanda

    Hi am just after some advice please. I had a DRO just over 6 years ago and i have never wanted to apply for any credit since but i now have two children and iv had my own buisness for the last two years and things seem to be looking up. Im with Experian and my DRO is no longer on my file and my score is 961. Could I apply for a Mortgage and do i have to notify them about my DRO. Thanks.

    • moneyaware

      Hi Amanda,

      Thanks for posting.

      When you apply for a mortgage most lenders will ask if you’ve ever been bankrupt, had an IVA or a DRO.
      This is something you’d need to declare.

      As you’ve had a DRO in the past, this could impact your ability to get a mortgage in the future.
      If you’d like some more advice about mortgages we have our own team that can help you with this.
      You can find out how to get in touch with them here:

      http://www.stepchange.org/Howwecanhelpyou/Mortgagesandequityrelease/Mortgages.aspx

      If you have any more questions please let us know.

      Kind regards,

      Jen

  • Carole

    I was discharged from a DRO in March 2011 and I am currently in an IVA with Harrington Brookes , but I am having a bit trouble with one of my debtors as Harrington Brooke’s has not been in contact with for me to solve this. If I cancel my IVA can I apply for a DRO again.

    • moneyaware

      Hi Carole,

      While you’re IVA is still active it is best to address all of your concerns and questions to your IVA provider.

      If you’re not happy with your IVA provider you can make a complaint about them. You may find complaining directly to Harrington Brooks can resolve this: http://www.harringtonbrooks.co.uk/complaints.

      Kind regards

      James

  • Danny

    I’m considering a DRO but am unsure what counts as essential living expenses… will this include mobile, b’band, tv licence, car tax, mot, insurance, clothes, haircuts?

    • moneyaware

      Hi Danny,

      Essential living costs are made up of your utility bills, food, essential and other costs including those that you’ve mentioned.

      It’s important to know that when looking at any debt solution, including a debt relief order (DRO) your situation and budget will be considered, and we’d also look at what costs are fair and reasonable.

      We know that everyone’s situation is different, but in some cases there may be costs that are higher or lower than what we’d usually expect, and in this case we can look at these costs individually based on your situation.

      Why don’t you use our online Debt Remedy tool available at http://www.stepchange.org/debtremedy to enter details of your debts, income, outgoings and living costs and we’ll recommend the most suitable debt solutions for you.

      If you’d prefer, you can call us. Visit http://www.stepchange.org/contactus to find out how to get in touch.

      Kind regards

      Rory

    • sue

      hi im considering a DRO but im worried if it would affect my job , does any one know about this thank you

      • moneyaware

        Hi Sue,

        A DRO is a type of insolvency, and this does mean it can affect some types of employment so it’s a good idea to check your employment contract.

        Some jobs such as finance, security, public sector areas such as the police and army and other professional bodies have specific rules on insolvency that could cause issues.

        If you’re considering a DRO as a debt solution, it’s best to speak to an organisation that can help look at your best options and recommend a solution that works best for you. All DRO’s need to be applied for through a registered intermediary and there are specific rules on whether this is the right solution for you.

        If you’d like us to help, you can visit our website at http://www.stepchange.org/contactus or use our free Debt Remedy tool to get debt advice online at http://www.stepchange.org/Debtremedy

        I hope this helps,

        Rory

      • sue

        Hi thank you Iv just spoken to step change But they said I need to check my contract as I do deal with money thank you great service from step change

  • sue

    iv got a sole account that i use and will put the dro on this account , iv also got a joint account which i dont use but my ex husband does will it affect this one too