A debt relief order (or DRO) could provide a path out of severe financial difficulties for people who find themselves with limited options. Like an IVA or bankruptcy, a DRO is a form of insolvency, but, in certain scenarios, it could work out as a cheaper way out of debt than either of those paths.

To be granted a DRO you must fulfil certain criteria. So, before going any further, let’s take a look at those requirements.


DROs are really intended for those who only have small debts, but simply can’t pay them. As such, you will not be eligible for a DRO if the monies you owe amount to more than £15,000. Secondly, if you have capital available that you could be using to pay off your creditors then you won’t be able to obtain a debt relief order. This includes any vehicle worth a £1,000 or more or any other possessions worth more than £300 as well as savings and assets. One possible exception is a pension fund in the case of people who haven’t yet retired.

Furthermore, you must have a very low level of disposable income. If you are left with more than £50 a month in spare cash after paying for essentials then, again, the DRO route is not open to you. This includes all your sources of income.

Finally you need to have lived in, had a property, or run a business in England or Wales in the last three years.

As well as your own financial situation, the kinds of debt in question need to be considered. Some sorts of debt are excluded from DROs. This means that, if you do obtain a DRO and you have the following sorts of debt, they will not be covered in it.

  • Court fines and confiscation orders
  • Child support and maintenance payments
  • Student loans
  • Social fund loans

It needs to be pointed out that, if, in an attempt to make yourself eligible you take measures such as hiding assets or deliberately selling possessions for less than they are worth within a year of applying for a DRO you can be refused, and also potentially prosecuted for the fraudulent offense.

As you can see, for many people a DRO is simply not an option. However, if you have no property and very few assets it can see you clearing off a sizeable amount of debt that you would simply not be able to tackle any other way. As such, though it is a drastic measure that you shouldn’t take lightly, for those eligible, a DRO does have a number of benefits for those with modest debts and little prospect of financial improvement.

What Are the Benefits of a DRO?

As with other forms of insolvency, a DRO will grant you protection from all the creditors whose debts are included within it. For a year, which is the term of a DRO, the creditors can’t make any claims against you or demands on you. In addition, you don’t need to make any payments towards your debts during this time. Once the year is up the debts are written off entirely.

This means that, as long as all your debts are included within the DRO, you can be left completely debt free in the same timeframe that you would if you became bankrupt, without having to sacrifice your earnings, your belongings and having your spending regulated in quite the same way. You could also see a much higher proportion of your debts written off than you would if becoming insolvent through an IVA and it will also allow you to clear your debts much quicker than would be possible under a debt management program.

Given how substantial these benefits are it could be tempting to see a DRO as an easy way of debt. However, it has its consequences…

Consequences of a DRO

A DRO will remain on your credit file for a further six years once it has come to an end, which could make it difficult for you to obtain credit. During the time of the DRO you may also be unable to open new bank accounts.

You will have restrictions placed on your financial freedom whilst you are under the terms of the DRO. For example, you can’t take out any new credit worth more than £500 without explaining to the lender that you have an order in place. On top of this, during the year you are under the order you need to tell the receiver of any changes to your financial circumstances. If you came into money suddenly, you couldn’t just keep quiet about it.

Once you have a DRO to your name you can’t direct or be involved in the managing of a limited company without permission from the court. If you were already running a business you cannot attempt to change its name without making partners and those that you do business with aware that it is the same venture you were heading when the DRO was obtained.

If you attempt to circumvent these restrictions or deceive the receiver whilst under the term of the DRO then a debt relief restriction order can be applied to you. If this happens the restrictions can last up to 12 years after the original order.

Finally, once you’ve had a DRO you cannot obtain another for six years, so if you quickly find yourself in trouble again, a debt relief order will not be available to you. In short, having had a DRO could be something of a roadblock to your future plans. Think carefully about what they may mean to you and whether you could find another way of tackling your debts before you apply.

Applying for a DRO

To apply for a DRO you will need the help of an intermediary who can take you through the process. This could be an insolvency practitioner (you can find one near you using The Insolvency Service website, or by going to the CAB). This intermediary will work with you to make sure you can give all the information needed to demonstrate that you truly are eligible for a DRO.

As with going bankrupt, you do actually need to pay in order to apply for a DRO. However, it is much cheaper. The fee is for £90 and can be paid in instalments over a period of up to six months, which would work put to a minimum payment of £15 a month. This fee needs to be paid before the order can be made and is non-refundable, even if your application is unsuccessful.