Debt Relief Orders

Introduction to debt relief orders

A Debt Relief Order (DRO) is a formal debt solution available to individuals in England, Wales, and Northern Ireland who have relatively low levels of debt and minimal assets. Overseen by the Insolvency Service, a DRO aims to offer a fresh start for people who genuinely cannot afford to repay what they owe and are looking for a low-cost alternative to bankruptcy. While the concept can be intimidating, understanding how a DRO works and whether it is right for your circumstances can help you make an informed decision and potentially relieve a great deal of financial stress.

A DRO is often considered a ‘lighter-touch’ form of insolvency, primarily because it involves less direct court involvement compared with bankruptcy, and it comes with a relatively low application fee. If you qualify, it can provide a legally binding period during which creditors cannot take further action against you. At the end of this period, usually 12 months, if your financial situation remains unchanged, most debts covered by the DRO are written off. However, it’s important to note that a DRO is a serious step and can have long-term implications for your financial record. This guide provides comprehensive information on what a DRO is, who can benefit, and the process for applying, allowing you to navigate your finances with clarity and confidence.

When considering a DRO, it’s important to have a realistic view of how it will impact your life and finances both in the short and long term. Below are some reasons people turn to DROs:

• Financial respite: A DRO can offer protection from creditor action, giving you the breathing room to focus on essential living costs without being constantly pursued for repayments.

• Low-cost insolvency solution: The fee for a DRO is usually much lower than that for bankruptcy, making it more accessible to individuals with limited means.

• Legal protections: Once approved, creditors covered by the DRO cannot contact you to request payment or take legal action, provided the DRO conditions remain satisfied.

Although a DRO can offer significant advantages, it’s not suitable for everyone. If you have debts above a certain threshold, substantial assets, or more complex financial circumstances, other debt solutions might be more appropriate. Additionally, while a DRO can clear eligible debts, it will also appear on your credit file and make future borrowing more difficult for several years.

In the sections that follow, this guide will delve into the specifics of a DRO, exploring the mechanics of how it works, who is eligible, and what types of debts are covered or excluded. You will also find information on the application process, how much it costs, and what happens during the ‘moratorium period’. Finally, we will look at life after a DRO, the impact on your credit rating, the alternatives available, and provide frequently asked questions to address common concerns. By the end, you should have a solid grasp of whether a DRO might be a viable solution for your circumstances and how to proceed if you decide to take this step.

How a DRO works

A Debt Relief Order (DRO) provides a defined period of legal protection from creditor action for individuals who meet specific financial criteria. During this ‘moratorium period’, typically lasting 12 months, all eligible debts are effectively placed on hold. If your circumstances do not improve before the end of that period, your eligible debts are written off, allowing you to start anew without the burden of those obligations. Understanding the mechanics of how a DRO works can empower you to handle your finances more confidently, particularly if you feel overwhelmed by debt.

In practice, a DRO is administered by an approved intermediary and the official receiver (a government official appointed to oversee the process). The official receiver reviews your financial situation to confirm that your debts and assets fall within certain thresholds. If you meet the criteria, you will be placed under a moratorium during which creditors cannot pursue you for payment on the debts included in the order. Once the moratorium ends—assuming no significant change to your financial situation—those debts are officially discharged.

Below is a general outline of what to expect when a DRO is in place:

1. Immediate protection: Creditors cannot chase you for included debts or take legal action such as filing a county court judgment (CCJ).

2. Restricted activities: You must comply with certain restrictions, such as accurately reporting any change in circumstances and adhering to the rules set by the official receiver.

3. Review of circumstances: If your financial situation improves—for instance, if your income rises significantly or you inherit money—the DRO could be revoked.

4. End of moratorium: After 12 months (in most cases), if there have been no significant financial improvements, the debts listed in the DRO are wiped out.

The central appeal of a DRO is its ability to provide breathing space for those who are genuinely unable to repay their debts. By freezing creditor action, individuals can concentrate on securing necessities like housing and utilities without the stress of escalating debt pressure. However, it’s crucial to remember that a DRO is part of the insolvency framework and comes with serious long-term implications. Your credit rating will be affected, and the DRO will appear on the Individual Insolvency Register, which is publicly accessible.

Below is a brief table summarising some key features of a DRO:

Another vital point is that while a DRO can be an effective solution, it is not guaranteed if you fail to meet the eligibility requirements. The rules around who can apply are strict, and approval is at the discretion of the official receiver. Factors such as the nature and amount of your debts, the value of your assets, and your disposable income are all considered when making a decision.

Choosing to apply for a DRO involves weighing up both the positives and negatives. On one hand, it provides a valuable safeguard against creditor harassment and offers the potential to clear debts. On the other, it severely impacts your creditworthiness, making it harder to obtain credit or certain financial products in the future. By carefully reviewing how a DRO works and recognising its potential impact, you can move forward with greater confidence, whether you decide to pursue it or consider other debt solutions.

Eligibility criteria

Qualifying for a Debt Relief Order (DRO) requires meeting strict criteria set out by the Insolvency Service. These guidelines are designed to ensure that only those who genuinely cannot manage their debts and have minimal assets are able to benefit. Before applying for a DRO, it is essential to determine whether your income, debts, and assets fall within the specified thresholds.

In general, you may be eligible for a DRO if:

• You owe less than a certain threshold in qualifying debts (this threshold can change, so it’s important to check the current limit).

• You have minimal or no surplus income after covering basic living expenses.

• You do not own valuable assets. There is usually a limit on the total value of assets you can possess.

• You have not had a DRO within the last six years and are not currently subject to another formal insolvency procedure.

• You live in England, Wales, or Northern Ireland or have been a UK resident in the last three years.

Typically, eligibility requirements revolve around having debts below a certain value. As of recent guidelines, the debt level threshold for a DRO has been set at or around £30,000, but this can vary. Your disposable income—what’s left after essential living costs such as rent, food, and utilities—should be very low, generally under £75 per month. Moreover, you should not own assets of significant value. Even items like a car might be taken into account, depending on their worth and whether they are deemed essential.

It’s equally important to know what might disqualify you from a DRO. For instance, if you own a house, regardless of whether there is equity, you will generally not be eligible. If you possess any assets that exceed a defined value, this may push you out of the qualifying range. Additionally, if you have been involved in recent financial transactions that suggest you’ve deliberately reduced your assets or income to appear eligible, the official receiver has the power to investigate and refuse your application.

Below is a bulleted overview of key factors that may affect your eligibility:

• Total debt level: Must typically not exceed the set threshold.

• Surplus income: Must be below the stipulated monthly amount after essential living costs.

• Assets: Must not exceed the allowed total value (excluding basic household items).

• Residency: Must be resident in, or have recent ties to, England, Wales, or Northern Ireland.

• Previous DRO history: No DRO in the last six years, and not under any other insolvency procedure.

Advisers and intermediaries play a crucial role in assessing your eligibility. You cannot apply for a DRO directly; an approved intermediary must facilitate the process. This intermediary will need detailed information about your income, outgoings, debts, and assets. They will help you fill out the application, verify that you meet the criteria, and submit your case to the official receiver.

If you are unsure about your eligibility, it is prudent to seek professional guidance from a reputable debt charity or financial adviser specialising in debt solutions. They can provide clarity on whether you meet the requirements or if another solution, such as a Debt Management Plan (DMP), Individual Voluntary Arrangement (IVA), or bankruptcy, might be more appropriate.

Understanding the eligibility criteria in detail ensures you do not go through the time-consuming and potentially costly process of applying for a DRO only to be rejected. By confirming your status upfront, you can approach the application with confidence or redirect your efforts toward finding a more suitable debt solution.

Debts covered by a DRO

One of the most crucial aspects of a Debt Relief Order (DRO) is determining which debts are included and effectively ‘frozen’ during the moratorium period. In essence, a DRO covers most unsecured debts, giving you a legally binding shield against creditor action. Once the order is approved, you do not make payments towards these included debts for the duration of the DRO, and if your circumstances remain the same by the end of the moratorium period, the debts are written off.

Below is a list of common debts that can be covered by a DRO:

• Credit cards, store cards, and personal loans: These unsecured borrowing options are typically included.

• Overdrafts: If you have an outstanding balance on your current account or any additional overdraft facility, it will generally form part of the DRO.

• Utility bill arrears: Debts owed for electricity, gas, or water can be covered, providing relief if you are significantly behind on payments.

• Council tax arrears: Money owed for council tax up to the point the DRO is granted can be included, although ongoing council tax bills must still be paid.

• Rent arrears (unsecured): Unpaid rent can be covered if it is not secured against the property; however, a landlord could still evict you for ongoing arrears, so caution is needed.

• Benefit overpayments: Certain overpayments for benefits may be included, unless they arise from fraud.

A DRO’s ability to cover multiple debts within a single legal framework can be a lifeline for individuals juggling various forms of unsecured borrowing. The objective is to provide relief from the persistent stress of multiple repayments and potential collection actions. However, the official receiver will review your debts to ensure they meet the qualifying criteria and fall under the total debt threshold.

To help visualise the kinds of debts commonly included, here is a concise table:

During the moratorium period, your creditors are bound by the rules of the DRO, meaning they cannot contact you to demand repayments of any debts included within the order. Additionally, they are prohibited from taking legal action, securing County Court Judgments (CCJs), or engaging bailiffs. This can make a substantial difference to your emotional wellbeing, as it alleviates the pressing anxiety of creditor harassment or escalating debt issues.

However, it is critical to remember that a DRO does not grant permission to stop paying ongoing commitments like utility bills that arise after the order has been approved. The DRO only applies to debts that exist at the time the order is granted. New arrears or additional borrowing taken on after the DRO starts are not included, and failing to keep up with necessary ongoing payments could result in new debts forming outside the scope of the DRO.

If you have any doubts about whether a particular debt can be included in a DRO, it’s important to consult a qualified adviser or intermediary before applying. They can provide clarity, ensuring you go into the application process with a full understanding of which debts will be frozen, how that might affect your day-to-day living costs, and the implications if certain debts are left out.

Debts excluded from a DRO

While a Debt Relief Order (DRO) covers a wide range of unsecured debts, there are certain types of debts and obligations that are excluded. Understanding these exclusions is crucial as they will not be written off at the end of the DRO’s moratorium period. If your most significant debts are excluded, a DRO may offer limited relief, prompting you to consider alternative debt solutions.

Generally, excluded debts include:

• Secured debts: Mortgages or secured loans are not eligible for inclusion, as the lender has a legal claim on the property or asset.

• Magistrates’ court fines and criminal penalties: If you owe court-imposed fines, they remain payable.

• Student loans: Most types of student loans, particularly those provided by the Student Loans Company, are excluded.

• Social fund loans: Certain government-backed loans are not covered by a DRO.

• Child maintenance or child support arrears: Any money owed to the Child Maintenance Service must still be repaid.

• Debts incurred through fraudulent means: If fraud has been proven, these debts usually cannot be discharged through a DRO.

One reason these debts are excluded is that they either carry a legal claim on assets (in the case of secured borrowing) or reflect obligations considered essential and non-negotiable (such as child maintenance). The principle is that a DRO is meant for unsecured debts that do not fall under these special legal or moral considerations.

Below is a brief bullet list to highlight key points to consider about excluded debts:

• Ongoing responsibilities: Even if some arrears on rent or utility bills can be included, you still must keep paying new charges or future instalments.

• Court orders: Certain court orders, such as compensation orders, are unaffected by a DRO and must be paid.

• Possible partial inclusion: While the bulk of a debt might be included, any aspect of it deemed fraudulent may not be.

• Implications for secured property: If you’re behind on mortgage payments, a DRO will not protect your property from repossession.

When considering a DRO, you should carefully review your entire financial situation to ascertain the exact types of debts you hold. If the majority of your debt burden stems from secured loans or other excluded categories, you may find that a DRO offers limited assistance. In such instances, exploring other debt solutions—like an Individual Voluntary Arrangement (IVA) or bankruptcy—might be more beneficial.

Additionally, it is important to inform your approved intermediary (the authorised adviser who will submit your DRO application) about all your debts. They can advise you on whether each debt qualifies for inclusion and highlight how excluded debts might affect the overall suitability of a DRO for your circumstances. Full transparency ensures that you do not experience unwelcome surprises later, such as discovering you still owe a large portion of your debt after the DRO has ended.

By fully understanding the debts that will remain your responsibility despite a DRO, you can make an informed decision about whether this route genuinely offers you the financial relief and fresh start you are seeking.

The application process

Embarking on the application process for a Debt Relief Order (DRO) can initially feel daunting, but it is relatively straightforward once you understand the necessary steps. A key aspect to remember is that you cannot directly apply for a DRO; you must work through an approved intermediary—often an adviser from a debt charity or a financial professional authorised by a competent authority. These intermediaries act as gatekeepers to ensure applicants meet the strict eligibility criteria.

Below is a concise overview of how the DRO application process typically unfolds:

1. Initial advice and eligibility check
   Your first step is to seek advice from an approved intermediary. They will check your finances in detail—looking at your income, expenses, assets, and total debts—to confirm if you meet the eligibility criteria. If they believe a DRO is the best solution, they will outline the potential benefits and drawbacks before proceeding.

2. Gathering documentation
   You will need to provide evidence of your financial situation, including bank statements, proof of income, details of your debts, and information on any assets you own. This documentation enables the intermediary to build a complete picture of your circumstances.

3. Completion of application form
   Once your intermediary is satisfied that you qualify, they will help you fill out the official application form. The form requests detailed information about your personal details, financial commitments, assets, and creditors. Accuracy is vital because any omission or incorrect details can lead to your application being delayed or rejected.

4. Payment of the DRO fee
   After the form is completed, you must pay the application fee. This fee is generally much lower than the cost of filing for bankruptcy, although it can still be a financial hurdle for some. In certain cases, charities may offer grants or other forms of assistance to help cover this cost.

5. Submission to the official receiver
   Your intermediary submits your completed application to the official receiver, who reviews all the information to confirm your eligibility. They may contact you or your intermediary for clarification if anything is unclear or additional information is needed.

6. Approval and moratorium
   If your application is approved, you enter the moratorium period—usually 12 months. During this time, creditors listed in the DRO cannot take legal action against you. You will also face restrictions such as reporting any change in financial circumstances to the official receiver.

Throughout the application process, it is imperative that you remain truthful about your circumstances. Providing incomplete or misleading information can lead to serious consequences, including potential criminal charges for fraud. Once the DRO is in place, it is equally important to adhere to all conditions, including reporting any significant change in your income or assets.

Consider the following tips to help your application proceed as smoothly as possible:

• Respond promptly to queries: If the official receiver or your intermediary requests more details, provide the information quickly to avoid delays.

• Notify creditors: While the DRO will be formally registered, it can be beneficial to inform creditors that your application is underway to manage their expectations.

• Check supporting documents: Ensure all documents you submit are up to date and accurate. This includes recent payslips, bank statements, and letters from creditors detailing outstanding balances.

• Stay organised: Keep a folder (physical or digital) of all relevant paperwork to make it easier to reference if questions arise.

Once your DRO is approved and begins, you will feel the immediate relief of knowing your eligible debts are frozen and that your creditors cannot pursue you for payments. However, the process does not end there—you remain under the watchful eye of the official receiver for the duration of the moratorium. Staying informed, organised, and honest will help you navigate this period successfully and position you for a brighter financial future after the DRO ends.

Cost and fee structure

While a Debt Relief Order (DRO) is typically considered a low-cost alternative to bankruptcy, it is not without its financial obligations. The most direct cost involved is the DRO application fee, which is paid to the Insolvency Service once you have completed the necessary forms with your approved intermediary. Understanding how these costs work and what you might be able to do to reduce or manage them is vital when considering a DRO as a solution to debt.

The DRO application fee

The DRO application fee is a fixed amount and tends to be significantly lower than the cost of bankruptcy. You pay this fee before your application is submitted, and once paid, it is non-refundable—even if your application is rejected. However, the relatively modest fee is one reason individuals with minimal income or assets find a DRO more accessible than other formal insolvency proceedings.

Below is a simplified table outlining a comparison of the fees for different debt solutions:

Payment assistance and instalments

Some people find it challenging to pay the DRO fee in one lump sum due to already strained finances. In certain cases, the organisation acting as your intermediary might allow you to pay the fee in instalments. However, your application can only be submitted once the fee is fully paid. You may also be able to approach local charities or advice centres to see if they provide grants or financial assistance to cover the DRO fee, especially for those in severe financial hardship.

Additional costs and considerations

1. Intermediary services: While debt charities often provide intermediary services for free, some private companies might charge a fee for their help. Always clarify whether there is any cost for intermediary services before proceeding.

2. Ongoing costs: Once your DRO is approved, you are under no obligation to make payments to the debts included in the order. However, you must continue paying essential bills and any debts not covered by the DRO, such as secured loans or criminal fines.

3. Opportunity costs: Even though the fee is relatively low, you should consider the long-term impact on your credit rating and future financial options. A DRO might save you money in the short term compared to other solutions, but it can carry long-lasting credit implications.

Below is a short bullet list summarising key considerations around the DRO fee and associated costs:

• Payment flexibility: You can often pay the application fee in stages, but the full amount must be settled before submission.

• Non-refundable: If your application is denied for any reason, the fee is not returned.

• Professional advice: Ensure you consult a free debt charity or qualified adviser if you’re uncertain about any additional fees.

• Debt relief vs. future impact: Balancing the immediate relief with potential future credit limitations is essential.

Ultimately, for those who qualify for a DRO, the fee is often seen as a worthwhile investment for the possibility of having eligible debts written off after the moratorium period. By carefully planning for how you will manage the payment—either upfront or through instalments—you can avoid delays in your application. Make sure to discuss all possible fee support options with your intermediary; they will be best placed to guide you on local or national assistance programmes that might alleviate the financial burden of the application process.

The moratorium period

Once a Debt Relief Order (DRO) is approved, you enter what is known as the ‘moratorium period’, typically lasting 12 months. During this time, you are protected from creditor action in relation to the debts listed in your DRO. The moratorium period is designed to offer you some breathing room to focus on essential living costs, without the anxiety of creditor letters or potential legal actions hanging over your head.

What happens during the moratorium?

Immediately after your DRO is confirmed by the official receiver, the debts included in your order are effectively frozen. Creditors covered by the DRO cannot contact you to demand repayment, nor can they pursue legal enforcement. If you were already subject to County Court Judgments (CCJs) or other legal processes for those debts, they are suspended for the duration of the moratorium.

Key aspects of the moratorium period:

• No debt repayments: You generally do not pay anything towards the debts in the DRO.

• Change of circumstances: You must inform the official receiver if your financial situation improves significantly—if you receive an inheritance, for example, or if your disposable income increases.

• Asset restrictions: You cannot sell or transfer assets above a certain value without informing the official receiver.

• Credit restrictions: You must disclose that you are in a DRO if you apply for credit over a certain threshold (usually £500).

Potential pitfalls

While the moratorium period provides considerable relief, it is essential not to treat it as a total ‘break’ from all financial responsibilities. You remain liable for daily living expenses and any new debts incurred after the DRO began. Missing payments on ongoing bills—such as current rent, utilities, or council tax—could mean you start accumulating new arrears that are not protected by the DRO. Moreover, failing to report a change in financial circumstances can lead to serious consequences, including the revocation of your DRO.

Consider these potential pitfalls:

• New debts: If you borrow money after the DRO is in place, those new debts will not be covered.

• Fraud investigations: Any suspicion of misleading or inaccurate information could prompt an investigation and put the DRO at risk.

• Credit reputation: Your DRO is recorded on your credit file, which can hinder your ability to obtain credit even during the moratorium.

Life under the moratorium

To navigate this 12-month window effectively, it helps to budget carefully and focus on building healthy financial habits. Avoid taking on new credit wherever possible, and stay current on any bills or commitments that are not part of the DRO. Some people use the moratorium period to seek free or low-cost financial education resources, giving them a stronger foundation for managing money once the DRO ends.

Below is a short bullet list to guide you through the moratorium period:

• Stick to your budget: Keep track of your income and outgoings to avoid accumulating new debts.

• Maintain open communication: Keep the official receiver and your intermediary informed of any significant changes.

• Keep evidence: Save letters or documents that show improvements or challenges in your finances—this can help if there’s any query about your circumstances.

• Plan for the future: Use this period to explore ways of improving your financial literacy and consider how you will rebuild your credit score after the DRO.

Once the 12 months pass—assuming your finances haven’t significantly improved—your eligible debts are formally written off. This can be a life-changing moment, allowing you to move forward without the burden of unmanageable debts. However, the end of the moratorium marks just the beginning of a new phase, where you’ll need to carefully rebuild your financial position and establish a secure footing for the future. The following sections of this guide will help you understand your rights, responsibilities, and practical steps to take both during and after the DRO process.

Rights and responsibilities during a DRO

When you are subject to a Debt Relief Order (DRO), you gain certain legal protections, but you also accept significant responsibilities. These obligations are in place to ensure that the DRO is used lawfully and that you don’t undertake activities that could undermine its integrity. Understanding these rights and responsibilities helps you stay on the right side of the regulations and make the most of the fresh start a DRO can offer.

Your rights

1. Protection from creditors
   Once your DRO is in place, creditors included in the order cannot demand payment, add further interest or charges, or take legal action against you. This protection can be a relief for anyone who has been under constant pressure from phone calls, letters, or bailiffs.

2. Debt relief at the end of the moratorium
   If your financial situation remains unchanged during the 12-month moratorium period, the covered debts are written off. This gives you a significant opportunity to move forward without the weight of those debts.

3. Essential living expenses
   You have the right to maintain reasonable living costs—such as food, utilities, and rent—without being forced to redirect money towards your DRO debts. Creditors cannot force you to pay if the debt is included in the DRO.

4. Confidentiality
   While your DRO is recorded on the public Individual Insolvency Register, creditors not included in the order generally do not receive notification or special information about your DRO unless you choose to disclose it.

Your responsibilities

1. Honesty about your finances
   You must provide accurate and complete information about your income, assets, and debts throughout the DRO process. Any substantial change in your financial circumstances—like getting a pay rise or inheriting money—must be reported to the official receiver.

2. No preferential treatment of creditors
   You cannot pick and choose which debts to pay off outside of your living expenses if they’re covered by the DRO. Paying one creditor over another could be considered a violation of the insolvency rules.

3. Adherence to restrictions
   You may need to inform potential lenders of your DRO status if you try to borrow more than £500 during the moratorium period. Furthermore, you are generally not allowed to act as a company director or form a company without disclosing your DRO status.

4. Cooperation with the official receiver
   During the moratorium period, you might be asked for additional information or documents to confirm your situation. It is your responsibility to respond promptly and honestly.

Common scenarios to watch out for

• Receiving a windfall: If you come into a significant sum of money (e.g., through inheritance or lottery winnings), you must inform the official receiver. This could lead to your DRO being revoked if it’s deemed you can repay your debts.

• Changes in employment: A new job or a pay rise might boost your disposable income above the threshold, impacting your DRO status.

• Moving home: A change in address doesn’t necessarily affect your DRO, but any change in rent or housing benefit could alter your financial calculations.

Here are a few quick reminders to help you navigate your rights and responsibilities effectively:

• Maintain records: Keep documentation (receipts, pay slips, bank statements) that evidence your financial situation during the DRO.

• Avoid new credit: While you may be able to borrow small amounts under £500, it’s wiser to avoid additional debt altogether.

• Notify relevant parties: Ensure the official receiver and your intermediary are informed of major life changes.

• Stay vigilant: Check your bank and credit statements to confirm no interest or charges are mistakenly applied to debts covered by the DRO.

By fully understanding both the advantages and obligations that come with a DRO, you can make the most of this debt solution. It grants a rare opportunity to reset your finances, but only if you follow the rules and maintain transparent communication with the official receiver. In the end, balancing your rights and responsibilities is key to a successful outcome under a DRO, setting you on a path to healthier financial prospects once the moratorium period ends.

Life after a DRO

Completing a Debt Relief Order (DRO) can be a watershed moment in your financial journey, offering relief from the burden of unmanageable debts. However, the end of the 12-month moratorium is not the end of your financial responsibilities. While the DRO might wipe out most (if not all) of your eligible debts, you’ll need to navigate the aftermath carefully to rebuild your creditworthiness, maintain stability, and avoid slipping back into problem debt.

Immediate changes after the moratorium

Once your DRO ends, any debts included in it are legally written off, assuming your financial situation did not change substantially during the moratorium period. You are no longer liable for those debts, and creditors cannot pursue you for payment. This can be a huge relief, but it does not mean you’re automatically on solid financial ground.

Here are some immediate considerations:

• Check your credit file: Ensure that your credit file accurately reflects the discharged debts, as some creditors may be slow to update their records.

• Maintain ongoing commitments: Continue paying any ongoing bills or financial agreements that were not part of the DRO.

• Notify creditors of changes: If a creditor tries to pursue a discharged debt, provide them with your DRO reference number to resolve any misunderstandings quickly.

Rebuilding your credit rating

A DRO remains on your credit file for six years from the date it was granted. This can lower your credit score, making it more difficult to obtain loans, credit cards, or even some mobile phone contracts. However, you can begin to rebuild your credit rating over time by demonstrating responsible financial behaviour.

Consider the following steps:

1. Register on the electoral roll: Being listed at your current address can help improve your creditworthiness.

2. Use a basic bank account: If you had issues with your previous bank, consider opening a basic account that helps you manage money without overdraft facilities.

3. Pay bills on time: Setting up direct debits for utilities and other commitments helps to show a consistent payment record.

4. Consider a credit builder card: If you’re financially stable enough, a credit builder card can help improve your score, provided you repay in full and on time each month.

Creating a sustainable budget

One of the main benefits of completing a DRO is that it can teach you crucial lessons about budgeting. Use the freedom gained after the discharge of your debts to establish a financial plan that prevents history from repeating itself.

• Track your spending: Keep an eye on where your money goes and identify areas where you can cut back if needed.

• Set financial goals: Whether it’s saving for an emergency fund, a home deposit, or education, having clear goals can motivate better money management.

• Build an emergency fund: Even setting aside a small amount each month can help cushion against unexpected expenses, reducing the likelihood of new debt.

Dealing with persistent obstacles

Even after a DRO, you might face challenges such as lingering negative markers on your credit report or difficulty renting a property where a credit check is required. Some employers also run credit checks, although this is more common in specific sectors like finance. Honesty about your past financial difficulties, combined with evidence of a renewed commitment to responsible money management, can help you navigate these obstacles.

Below is a short table summarising key areas to focus on after your DRO:

Exiting a DRO marks the start of a new chapter in your financial life. If you continue to manage your money carefully, budget effectively, and rebuild your credit, you can gradually overcome the long-term implications of having a DRO on your record. Many individuals emerge from a DRO with more robust financial habits and an improved sense of control over their finances, showing that while the process can be challenging, it often leads to a healthier financial future in the long run.

Impact on credit rating

A Debt Relief Order (DRO) is a serious legal measure that stays on your credit file for six years from the date it’s granted. This presence will invariably lower your credit score, reflecting a period of financial distress and formal insolvency. Understanding the way a DRO affects your credit profile can help you make informed decisions about applying for new credit in the future and taking steps to improve your financial reputation over time.

How a DRO appears on your credit file

Credit reference agencies (CRAs) in the UK—typically Experian, Equifax, and TransUnion—collect information about individuals’ borrowing and repayment history. Once a DRO is approved, it appears on your file as an insolvency marker, similar to how bankruptcy or an Individual Voluntary Arrangement (IVA) might. This marker alerts potential lenders that you have had difficulties managing your debts and opted for a formal insolvency solution.

Immediate consequences

• Reduced credit score: Your score is likely to drop substantially, especially if you already had late payments and defaults on your record before the DRO.

• Limited borrowing options: Lenders often view DROs as a high-risk flag, so you may struggle to get mainstream credit cards, personal loans, or mortgages.

• Higher interest rates: Even if you do secure credit, lenders might offer less favourable terms with higher interest rates to offset their perceived risk.

• Potential difficulties in other areas: Some insurance providers, landlords, and even employers run credit checks, which could influence their decision to work with you.

Rebuilding your credit score

While a DRO will affect your credit rating for six years, you don’t have to wait that entire time to start improving your score. Demonstrating responsible financial behaviour now can gradually offset the negative impact. Here are some practical tips:

1. Pay bills on time: Consistency is crucial. Setting up direct debits for utilities and essential services prevents missed payments.

2. Use credit responsibly: A small, well-managed line of credit—like a credit builder card—can help rebuild positive payment history if you always pay the balance in full.

3. Check for inaccuracies: Occasionally, debts included in a DRO may be incorrectly marked as still outstanding. Review your credit file regularly and dispute any errors.

4. Get on the electoral roll: Being registered to vote at your current address can boost your credit score and provide lenders with proof of stability.

Navigating life post-DRO

For many people, the biggest challenge is re-entering the world of credit after a DRO. You may find it difficult to secure something as simple as a mobile phone contract. Some phone providers run credit checks, and a recent DRO can signal that you are a high-risk customer. This doesn’t mean it’s impossible, but you may need to start with ‘pay-as-you-go’ options or look for providers who cater to those with low credit scores.

Below is a short bullet list to help you stay motivated on your credit rebuilding journey:

• Track your progress: Use a free or paid credit monitoring service to watch your score gradually improve.

• Set realistic expectations: Understand that you won’t jump to a perfect score overnight, but you can make steady gains.

• Avoid unnecessary credit searches: Too many applications in a short period can lower your score further.

• Seek professional advice: If you’re unsure how to rebuild your credit, specialised financial advisers and non-profit debt organisations can guide you.

The impact of a DRO on your credit rating is significant but not insurmountable. Over time, and with responsible financial habits, you can begin to restore your standing in the eyes of potential lenders. Patience, discipline, and a clear plan for managing money are essential ingredients for regaining a healthier credit profile, thereby setting the stage for a more stable financial future.

Alternatives to a DRO

A Debt Relief Order (DRO) can be a powerful tool for those with relatively low levels of debt, low disposable income, and minimal assets. However, not everyone qualifies, and even if you do, it’s wise to consider all available options before committing to a formal insolvency measure. Several alternatives to a DRO may better suit your financial situation, depending on factors such as the total amount of debt, your employment status, and the kinds of debts you owe.

1. Debt Management Plan (DMP)

A Debt Management Plan is an informal arrangement with your creditors to repay your debts at a more manageable rate each month. It does not offer the same legal protections as a DRO, but it can be helpful if you have the capacity to pay off your debts over time. DMPs typically work best for unsecured debts such as credit cards, personal loans, and overdrafts.

2. Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement between you and your creditors, overseen by an insolvency practitioner. You make fixed monthly payments over a set period—usually five years—and any remaining debt may be written off at the end.

3. Bankruptcy

Bankruptcy is a more drastic legal option. It may be suitable if you owe a large amount of money that you cannot repay in a reasonable timeframe, or if you don’t meet the criteria for a DRO. Once declared bankrupt, most of your unsecured debts are written off, but you face strict limitations on borrowing, and you could lose valuable assets such as property or a car.

4. Administration Order

An Administration Order is a court-issued repayment plan for people with debts under a certain threshold who have at least one County Court Judgment (CCJ) against them. You make a single monthly payment to the court, which then distributes the funds among your creditors.

5. Informal agreements with creditors

Sometimes, you can negotiate with your creditors directly—often with the help of a debt advice agency—to reduce your repayments or freeze interest temporarily. While this doesn’t have the legal backing of a DRO or IVA, it can be a quicker, more flexible route if your creditors agree.

Here is a brief table comparing key features of these alternatives:

In deciding between these options, consider not just the immediate benefit—such as halting creditor harassment—but also long-term implications for your finances, employment, housing, and overall quality of life. Seeking guidance from a professional debt adviser can provide clarity on which route is most viable for your circumstances. The right solution often depends on the combination of debt levels, types of debt, your job status, and whether you have valuable assets to protect.

Getting professional advice

Sorting through various debt solutions—DROs, IVAs, bankruptcies, or informal agreements—can be complex, especially if you’re already under financial and emotional stress. Professional advice ensures you fully understand each option and make an informed choice that aligns with your circumstances. Many charities and independent organisations in the UK offer free, impartial support, making expert help accessible regardless of your budget.

Why professional advice matters

1. Comprehensive assessment: A qualified adviser will assess your entire financial situation, taking into account factors such as your income, spending, debts, and long-term goals.

2. Tailored guidance: Professionals are trained to recommend the best solution for you, whether that’s a DRO or an alternative like a DMP or IVA.

3. Legal expertise: If you’re dealing with legal aspects of debt—like a CCJ or potential repossession—a specialist can ensure you understand your rights and obligations.

4. Emotional support: Debt can feel isolating and overwhelming. Advisers often provide a supportive, non-judgemental environment, helping to relieve stress.

Free and low-cost advice sources

• Citizens Advice: Has local branches and an online platform offering free help on money, legal, and other issues.

• StepChange: A major debt charity providing free, comprehensive advice and support services.

• National Debtline: Offers confidential, independent advice over the phone and via webchat.

• Debt advice foundations and local community centres: Smaller non-profits may operate in your area, providing face-to-face sessions and workshops.

Questions to ask a debt adviser

Meeting with a specialist can be more productive if you have specific questions in mind. Examples include:

• Which debt solutions am I eligible for, and how do their costs compare?

• What are the potential impacts on my employment, especially if I work in finance or other regulated industries?

• How will different solutions affect my credit rating and ability to secure housing?

• Can you help me negotiate with my creditors?

• Are there any charity grants or local resources that could help cover the DRO fee or other costs?

How professional advice can expedite your DRO application

If a DRO is deemed appropriate for you, the application must go through an approved intermediary, such as a debt adviser authorised to handle DROs. Working with someone knowledgeable can speed up the process of gathering documents, completing the necessary forms, and ensuring all your debts are correctly listed. Intermediaries also serve as a point of contact between you and the official receiver, minimising confusion and reducing the risk of mistakes that could delay or invalidate your application.

Below is a brief bullet list to summarise the key benefits of seeking professional advice:

• Accuracy: Get help reviewing documents to ensure all financial data is correct.

• Expert negotiation: Advisers can often negotiate lower payments or interest freezes on your behalf.

• Confidence: Knowing you have an expert in your corner can relieve anxiety and help you focus on rebuilding your life.

• Time-saving: Avoid guesswork by getting direct answers to your questions, saving you hours of online research.

In essence, receiving professional debt advice not only enlightens you on the best solutions but also enhances the likelihood of a smooth and successful outcome. Regardless of whether a DRO is right for you, consulting a reputable adviser can be an invaluable step towards financial stability and peace of mind.

Conclusion

A Debt Relief Order (DRO) can provide an accessible, legally supported way for individuals with low income, minimal assets, and relatively small debts to achieve a fresh financial start. The 12-month moratorium shields you from creditor actions, offering a vital reprieve from the pressures of overwhelming debt. If you meet the strict eligibility criteria and comply with the conditions set by the official receiver, the included debts are written off at the end of the moratorium period.

Despite these advantages, a DRO is not a one-size-fits-all solution. Its repercussions, notably on your credit rating, can last up to six years, influencing your ability to obtain credit and sometimes affecting other areas of your life—like renting property or even certain job applications. Understanding its impact on your finances, obligations during the moratorium, and life after a DRO is crucial for making an informed decision.

This guide has highlighted:

• How DROs work and what to expect during the moratorium period.

• Eligibility criteria that determine if you qualify.

• Debts covered under a DRO, as well as excluded debts.

• The application process, including the role of approved intermediaries.

• Costs and fees, and how to handle payment challenges.

• Life after a DRO and strategies for rebuilding your credit rating.

• Alternatives to a DRO, such as Debt Management Plans, IVAs, and bankruptcy.

• The importance of professional advice, whether or not you ultimately choose a DRO.

By combining the legal framework of a DRO with prudent money management and a willingness to seek out professional guidance, you stand a far better chance of regaining control over your finances. This fresh start can be transformative, but it also demands ongoing commitment and vigilance. If you are still uncertain about any aspect of a DRO or want to explore other debt solutions, do not hesitate to reach out for advice or consult further resources. Armed with the information in this guide, you are better equipped to take decisive steps toward a more stable financial future.

Frequently asked questions

Understanding the basics

What is a Debt Relief Order (DRO)?

A DRO is a formal debt solution available in England, Wales, and Northern Ireland for people with relatively small debts, low disposable income, and few or no valuable assets. It places qualifying debts on hold for 12 months (the moratorium period), after which they’re typically written off if your circumstances remain unchanged.

How does a DRO differ from bankruptcy?

Both are forms of insolvency, but a DRO has a lower application fee, less court involvement, and is generally for those with smaller debts and limited assets. Bankruptcy usually involves higher costs, can affect more substantial assets, and is intended for individuals with more significant debt levels who cannot repay in a reasonable timeframe.

Is a DRO the same as an Individual Voluntary Arrangement (IVA)?

No. An IVA is a legally binding repayment plan where you make monthly contributions towards your debt for a set term—often five years—whereas a DRO ‘freezes’ debts without any ongoing payments for a 12-month period. At the end of that period, most debts included are written off, provided your financial situation has not improved.

Who oversees DROs?

DROs are overseen by an official receiver, who is part of the Insolvency Service. You cannot apply directly to them; instead, you must go through an approved intermediary, often a debt adviser from a free debt charity or authorised financial organisation.

Why were DROs introduced?

They were introduced to give people with lower levels of debt a cheaper, more accessible alternative to bankruptcy. A DRO aims to help those who genuinely cannot repay their debts due to low income and limited assets, offering them a fresh start without some of the heavier consequences that come with bankruptcy.

Do DROs apply across the UK?

DROs are available in England, Wales, and Northern Ireland. Scotland has its own solutions for debt relief, such as the Minimal Asset Process (MAP) bankruptcy, so if you live in Scotland, you’ll need to look into the specific routes available there.

Eligibility and application

What debts count towards the eligibility limit?

All unsecured debts that can be included in a DRO—such as credit cards, loans, overdrafts, and council tax arrears—count towards the debt limit set by the Insolvency Service. You must ensure the total of these debts falls below the current threshold to be eligible.

Can I apply for a DRO if I own a car?

You may still qualify if the car’s value is below the asset limit set by the DRO rules and if you need the vehicle for essential travel, such as commuting to work or medical appointments. However, if the car is worth more than the allowed limit or deemed non-essential, you might not be eligible.

Do I need to disclose all my debts?

Yes. Full transparency is crucial. You must list every debt you have when applying for a DRO, including debts that you believe are too small or old. Leaving out any liability can lead to the DRO being revoked if discovered later.

What happens if I’ve had a DRO before?

You generally cannot apply for a DRO if you’ve had one in the last six years. If you still face unmanageable debts after that period, you may consider other formal solutions, such as bankruptcy or an Individual Voluntary Arrangement.

Can someone else apply for me?

No. You must apply in your own name with the help of an approved intermediary. Friends, family, or partners cannot apply on your behalf, although they can offer moral or financial support, such as covering the application fee if needed.

Do I need to attend court for a DRO?

Usually, no court appearance is required. Your intermediary submits your application to the official receiver online, and most communication occurs via phone, email, or post. This ‘lighter touch’ approach is part of what makes DROs more accessible for low-income individuals.

Life during a DRO

Are there restrictions on my spending once I’m in a DRO?

You must maintain a reasonable budget and cannot favour one creditor over another. You also need to inform the official receiver of any significant changes to your financial situation. Normal living costs—like rent, utilities, and food—continue as usual.

Can creditors still contact me?

Once the DRO is approved, creditors included in your DRO are barred from chasing you for payments or adding further charges on those debts. If they do contact you, provide them with your DRO reference number and direct them to the official receiver.

What if I inherit money during the moratorium period?

Any windfall must be reported to the official receiver. If the sum is large enough that it could cover your debts, your DRO might be cancelled, and you could become responsible for repaying what you owe.

Do I have to tell my employer about my DRO?

There’s no general requirement to inform your employer, but certain professions—especially in finance or law—may have rules about insolvency. Check your employment contract or speak confidentially to your HR department if you’re unsure.

Can I change my bank account during a DRO?

Yes, but proceed with caution if you owe money to your current bank (e.g., a bank loan or overdraft) that’s included in your DRO. The bank may freeze or close your account. Opening a new basic bank account elsewhere can be a good option to maintain day-to-day banking services.

Is there a limit on using credit while in a DRO?

You must declare that you’re under a DRO if you seek to borrow more than £500 during the moratorium period. While it’s not outright illegal to use credit, incurring new debt while in a DRO is generally discouraged, as it undermines the purpose of the relief order.

After the moratorium

Will my DRO automatically end after 12 months?

Yes, if your situation remains the same. However, if your circumstances improve significantly or you fail to follow the rules, the official receiver may revoke the DRO before the 12-month period finishes.

Do I need to do anything once my DRO ends?

In most cases, no further action is needed for the debts included. They are written off if you’ve adhered to the conditions. However, it’s wise to check your credit reports to ensure they’re updated accurately and that any defaulted debts now show as settled.

How long does the DRO stay on my credit file?

A DRO will remain on your credit file for six years from the date it’s granted. During this time, it can affect your ability to borrow money or secure certain contracts like mobile phone deals and car finance agreements.

Can I immediately apply for a mortgage after my DRO?

It’s unlikely you’ll qualify for a mainstream mortgage until the DRO is off your file or unless you can meet strict lending criteria. Lenders view a history of insolvency as a significant risk, so you may need specialist advice if you plan to buy a home soon after a DRO.

Is there a specific way to rebuild my credit score?

Focus on demonstrating responsible financial behaviour: pay bills on time, reduce credit utilisation, and potentially consider a credit builder card if you can manage it responsibly. Also, ensure you’re on the electoral roll, as this can help boost your overall credit profile.

Can my DRO be extended for more than 12 months?

Usually, it cannot be extended. The moratorium period is set at 12 months. However, if breaches occur or fraud is suspected, the official receiver may end the DRO prematurely or take further action to investigate your financial conduct.

Additional considerations

What if I have joint debts?

If you share a debt with someone else—like a joint loan or joint credit card—the entire debt can be included in your DRO. However, the other person remains liable for the full amount. Your DRO does not protect them.

Can I travel or move abroad during a DRO?

Yes, but you should inform the official receiver if you move abroad, as your residency status can affect your obligations. You must remain contactable in case they need to verify any changes to your financial situation.

What happens to outstanding legal actions?

Any legal actions connected to debts included in the DRO will usually be halted. Creditors cannot continue with County Court Judgments, enforcement, or bailiff action relating to those specific debts once the DRO is in place.

Will a DRO affect my ability to start a business?

A DRO typically imposes restrictions on becoming a company director or forming a limited company without disclosure. If you plan on self-employment or small business ownership, it’s essential to check these rules with the official receiver or get advice beforehand.

Are there any hidden fees?

Apart from the standard DRO application fee, legitimate free debt advice agencies won’t charge you extra. Private firms may charge for intermediary services, so always clarify any costs in advance. Once your DRO is approved, you won’t pay monthly fees as you might with other solutions like IVAs.

What if none of the other debt solutions apply to me?

If DRO eligibility criteria don’t fit your situation, consider alternative routes like bankruptcy, Individual Voluntary Arrangements, or informal arrangements. Seeking professional advice remains the best first step to understand your options thoroughly.

Still have questions?

If you find that you still have questions or concerns about Debt Relief Orders—or any aspect of dealing with debt—it may be helpful to speak directly with a qualified expert. Professional advisers can offer personalised guidance that takes into account your unique financial situation. Whether you need clarification on eligibility criteria, details about the application process, or insights into rebuilding your credit after a DRO, an expert conversation can provide the reassurance and direction you need.

Glossary

Administration Order

An Administration Order is a formal arrangement issued by a county court for individuals with one or more County Court Judgments (CCJs) and debts under a certain threshold. You make one monthly payment to the court, which distributes it among your creditors, providing protection from further enforcement.

Adverse Credit

Adverse credit refers to a poor credit history resulting from missed payments, defaults, or other negative markers such as a DRO, bankruptcy, or CCJs. It can make it harder to obtain loans and credit products at standard interest rates.

Approved Intermediary

An approved intermediary is an authorised debt adviser who assesses your finances and submits your Debt Relief Order application on your behalf. They must be recognised by a competent body to ensure they provide accurate and compliant advice.

Arrears

Arrears are missed or overdue payments on a debt or bill. When you fail to meet payment deadlines—such as rent, council tax, or loan instalments—these unpaid amounts accumulate as arrears.

Assets

Assets are items of value you own, such as property, vehicles, savings, or valuable possessions. In a DRO context, your assets must typically fall below a certain value to meet the strict eligibility criteria.

Bailiff

A bailiff (also known as an enforcement agent) is an individual authorised to collect debts on behalf of creditors, often by seizing and selling personal property. Once a DRO is granted, bailiffs cannot seize items for debts covered under the order.

Bank Account Freeze

A bank account freeze occurs when a bank restricts or halts all activity on an account, usually due to legal actions, suspicions of fraud, or insolvency proceedings. In some cases, if you owe money to your bank, they may freeze or close your account during a DRO.

Bankruptcy

Bankruptcy is a formal insolvency procedure aimed at individuals or businesses unable to repay their debts. Although similar to a DRO in some respects, bankruptcy tends to be for those with higher debts or assets and involves stricter requirements and costs.

CCJ (County Court Judgment)

A County Court Judgment is a legal ruling that a debt is owed. If you fail to repay or challenge a creditor’s claim, they can apply for a CCJ, which may lead to enforcement measures like bailiff visits or attachment of earnings orders.

Child Maintenance

Child maintenance refers to payments made to support a child’s living costs following separation or divorce. This type of obligation cannot be included in a DRO if the debt arises from ongoing maintenance requirements.

Claim Form

A claim form is a legal document filed at court by a creditor seeking a CCJ against a debtor. It outlines the amount owed and the justification for legal action, which can lead to a judgment if not responded to.

Consolidation Loan

A consolidation loan combines multiple debts into a single loan, usually with one monthly payment. While not a formal insolvency procedure, it can be an alternative debt strategy if interest rates and repayment terms are favourable.

Consumer Credit Act

The Consumer Credit Act is legislation regulating consumer credit agreements in the UK, including loans, credit cards, and hire purchase contracts. It sets out rules on how lenders must treat borrowers, covering aspects like interest rates and debt collection practices.

Creditor

A creditor is an individual or organisation that lends money or extends credit. Under a DRO, most creditors with qualifying, unsecured debts must halt recovery actions during the 12-month moratorium if they are included in the order.

Credit Rating

A credit rating, or credit score, is a numerical measure of your creditworthiness. Formal insolvency solutions like DROs can significantly lower your credit score, making it harder to secure loans or credit cards at competitive rates.

Debt

Debt is money owed to a lender, service provider, or other entity. It can result from credit cards, loans, overdrafts, and more. A DRO primarily addresses unsecured debts up to a certain limit, providing relief to those who qualify.

Debt Advice

Debt advice consists of professional guidance on managing, reducing, or resolving debt. Approved intermediaries, debt charities, and financial advisers provide tailored recommendations, ensuring you explore the best solution for your circumstances.

Debt Collector

A debt collector is a person or agency tasked with recovering overdue debts. They may contact you by phone, email, or letter, and in some cases, they can escalate collection efforts through legal avenues if the debt remains unpaid.

Debt Management Plan (DMP)

A DMP is an informal arrangement where you repay creditors at a reduced rate each month. Unlike a DRO, it doesn’t offer legal protection, and you’ll still be liable for the total debt, although interest and charges may be frozen in some cases.

Debt Relief Order (DRO)

A DRO is a formal insolvency option for individuals with low income, few assets, and unsecured debts below a specified threshold. It freezes creditor action for 12 months, after which most included debts are written off, provided there’s no change in your financial situation.

Default Notice

A default notice is a formal warning from a creditor stating you have missed payments and are in breach of the credit agreement. Once issued, the creditor can record a default on your credit file, potentially taking further legal action.

Disposable Income

Disposable income is the money left from your earnings after deducting essential living costs, such as rent, utilities, and food. DRO eligibility hinges on having little to no disposable income to repay debts.

Enforcement Agent

An enforcement agent (or bailiff) is empowered to collect debts under court orders or enforcement notices. Their role includes negotiating repayments or seizing assets to clear outstanding debts, although a DRO protects debts listed within it.

Financial Conduct Authority (FCA)

The FCA is the regulator overseeing financial services in the UK. It ensures firms act fairly when offering products like loans and credit cards and enforces guidelines to protect consumers from harmful lending practices.

Garnishment

Garnishment (or attachment of earnings) is a process allowing creditors to take money directly from your wages or benefits. Under a DRO, ongoing garnishments for qualifying debts are typically frozen during the moratorium period.

High Court Enforcement Officer

A High Court Enforcement Officer is authorised to enforce judgments from the High Court or certain County Court Judgments. They have more extensive powers than standard bailiffs, although a DRO can protect against their actions for covered debts.

Income and Expenditure

Income and expenditure refer to the money you earn and the costs you incur each month. A thorough breakdown of these figures helps determine if you qualify for a DRO and how much disposable income you have.

Individual Insolvency Register

The Individual Insolvency Register is a public database listing individuals in formal insolvency proceedings—such as DROs, IVAs, and bankruptcies—in England and Wales. Your name and details appear here during the duration of the DRO.

Insolvency Service

The Insolvency Service is a government agency responsible for insolvency frameworks, including DROs, bankruptcy, and IVAs. They appoint the official receiver who oversees and approves DRO applications submitted by approved intermediaries.

IVA (Individual Voluntary Arrangement)

An IVA is a legally binding agreement where you repay a portion of your debts over a set period—often five years. After this time, remaining unsecured debt can be written off, but it has stricter conditions and higher costs compared to a DRO.

Joint Debts

Joint debts are liabilities held by two or more people—such as a joint loan or credit card. If one party enters a DRO, the other remains fully responsible for the remaining balance if the debt is not repaid in full.

Judgment Creditor

A judgment creditor is a creditor who has obtained a court judgment against you, confirming you owe them money. During a DRO, their claims on unsecured debts are put on hold and cannot be enforced further.

Liability Order

A liability order is a court order that confirms you owe council tax or other local authority charges. If your arrears are included in a DRO, enforcement of these debts is generally frozen during the 12-month moratorium.

Money Advice

Money advice is guidance given by trained advisers, charities, or government bodies to help individuals manage their finances more effectively. This includes budgeting tips, debt options, and long-term financial planning.

Notice of Enforcement

A Notice of Enforcement is sent by an enforcement agent, giving you a short window to repay before they visit to recover goods. If a DRO is in place, the creditor should not proceed with enforcement for the covered debt.

Official Receiver

The official receiver is a government official within the Insolvency Service who administers and supervises insolvency processes, including DROs. They review and confirm whether applications meet the necessary conditions for approval.

Overdraft

An overdraft is a credit facility allowing you to spend more money than you have in your current account. Unsecured overdrafts can be included in a DRO, but if it’s linked to your bank account, the bank might close or restrict that account.

Payment Break

A payment break is a temporary pause or reduction in debt repayments granted by a creditor or as part of a formal agreement. A DRO, however, offers a more comprehensive freeze on creditor action for the included debts over 12 months.

Personal Insolvency

Personal insolvency refers to a legal state in which an individual cannot repay their debts. Solutions include DROs, IVAs, and bankruptcy, each with distinct rules and consequences.

Recurring Payment

A recurring payment is an arrangement where you authorise a creditor or service provider to take payments from your bank account or debit card automatically. These can continue unless you actively cancel them, even if you’re in a DRO.

Secured Debt

Secured debt is backed by collateral, such as a house or car. Mortgages and secured loans are not covered in a DRO because the creditor has a legal claim over the asset if payments are not made.

Statutory Demand

A statutory demand is a formal request for payment issued by a creditor. If not resolved promptly, it can lead to bankruptcy proceedings. However, if the debt is suitable and included in a DRO, enforcement may be halted.

Surplus Income

Surplus income is what remains after paying essential household bills and living costs. Individuals with a DRO typically have little to no surplus income, which is why they are considered unable to pay off their debts.

Third-Party Debt Order

A third-party debt order lets a creditor freeze and claim funds held by a third party—often in your bank account. If the debt in question is part of a DRO, this type of enforcement action should cease for the duration of the moratorium.

Trust Deed

A trust deed is a voluntary arrangement in Scotland, similar to an IVA. While not directly related to a DRO, it’s another type of personal insolvency for those living outside England, Wales, and Northern Ireland.

Voluntary Charge

A voluntary charge (or voluntary security) is where you agree to secure a debt against an asset, typically your home. Since DROs cannot include secured debts, this type of arrangement falls outside DRO protection.

Windfall

A windfall is an unexpected gain of money, such as lottery winnings or inheritance. If you receive a windfall during the DRO moratorium, you must inform the official receiver, as it could impact your DRO and eligibility.

Useful organisations

Citizens Advice

Citizens Advice is a network of independent charities offering free and confidential guidance on a range of issues, including debt and legal matters. Their trained advisers can help you understand your options regarding Debt Relief Orders and other financial solutions, ensuring you receive accurate information tailored to your situation.

• 0800 144 8848

• www.citizensadvice.org.uk

StepChange

StepChange is a leading debt charity dedicated to providing expert advice and support for those struggling with debt. They offer personalised guidance on Debt Relief Orders, helping you navigate the application process and explore suitable alternatives where needed.

• 0800 138 1111

• www.stepchange.org

National Debtline

National Debtline provides free, independent advice over the phone and online. Their advisers can explain how a Debt Relief Order works, assess your eligibility, and discuss practical steps to regain financial control, from budgeting tips to negotiating with creditors.

• 0808 808 4000

• www.nationaldebtline.org

MoneyHelper

MoneyHelper is a government-backed service designed to support consumers with a wide range of financial issues, including debt management. Their resources include budgeting tools, benefits guidance, and detailed information on Debt Relief Orders, ensuring you have a comprehensive overview of available solutions.

• 0800 138 7777

• www.moneyhelper.org.uk

The Insolvency Service

The Insolvency Service is a government agency responsible for overseeing formal debt solutions in England, Wales, and Northern Ireland. While they do not provide individual financial advice, they administer Debt Relief Orders and work with approved intermediaries to ensure the DRO process runs smoothly.

• 0300 678 0015

• www.gov.uk/government/organisations/insolvency-service

All references

Citizens Advice (2020). Debt solutions and insolvency guidance.
https://www.citizensadvice.org.uk/debt-and-money/

Citizens Advice (2021). Debt Relief Orders: Detailed advice.
https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/dealing-with-debt/alternatives-to-bankruptcy/debt-relief-orders/

Citizens Advice (2022). Moratorium periods explained.
https://www.citizensadvice.org.uk/

MoneyHelper (2022). Debt solutions explained.
https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt

StepChange (2021). Which debts are included in a DRO?
https://www.stepchange.org/debt-info/dro/debts-included.aspx

StepChange (2022). The effect of debt solutions on your credit rating.
https://www.stepchange.org/debt-info/credit-rating.aspx

The Insolvency Service (2019). A guide to debt solutions in England and Wales.
https://www.gov.uk/government/organisations/insolvency-service

The Insolvency Service (2020). Role of the intermediary in DRO applications.
https://www.gov.uk/government/organisations/insolvency-service

The Insolvency Service (2021). Debt Relief Orders: Current rules and updates.
https://www.gov.uk/government/organisations/insolvency-service