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What Is a Debt Relief Order (DRO) and Is It Right for You?
Not many people know what a Debt Relief Order (DRO) is, which some may see as problematic because it can be a real lifeline for those who need it. This type of solution usually receives less attention than an Individual Voluntary Arrangement (IVA), despite often being a simpler and less disruptive way to escape significant debt. However, it's crucial to understand that both options carry serious financial implications if you choose to pursue them.
Hold on a moment!
This page provides a brief overview of Debt Relief Orders. For complete details and a thorough understanding, read our article 'What Is a Debt Relief Order (DRO) and How Does It Affect You?' or scroll down to the purple box at the bottom of the page.
What Is a Debt Relief Order (DRO)?
In simple terms, a DRO is a way to manage your debts if you're finding it hard to pay them. Once approved, you usually won’t have to make payments towards the debts included in the DRO for 12 months. If your circumstances remain unchanged and the DRO is completed, the remaining included debts are written off.
That is the simplified version. As you might expect, there are conditions attached, including specific eligibility criteria you must meet and important restrictions to be aware of if you’re granted a DRO.
DRO Eligibility Criteria
Following the changes announced in the 2024 Spring Budget and implemented in April and June 2024, the eligibility thresholds were significantly expanded, making DROs accessible to many more people. Here's what you currently need to qualify in England and Wales:
- Total debt of up to £50,000 (raised from £30,000 in June 2024)
- £75 or less in spare income per month after paying your usual household expenses
- Assets worth no more than £2,000 in total (excluding basic household items and tools needed for your job)
- A vehicle worth no more than £4,000 (raised from £2,000 in June 2024)
- No application fee — the £90 administration fee was abolished in April 2024
- You must not have assets (including any interest in a property) that take you over the eligibility limits
- You have lived or worked in England or Wales in the last three years
- You have not had a DRO in the last six years
- You are not currently bankrupt, in an IVA, or subject to an interim order
These changes matter. Since they were introduced, the number of DROs granted has increased significantly, largely due to the removal of the fee and the expanded debt threshold.
What Restrictions Come With a DRO?
A DRO is not a decision to be taken lightly. Once in place, you face real restrictions that impact your day-to-day life:
- You cannot act as a company director or be involved in managing a company without court permission, and if you run a business under a different name, you must disclose your DRO status.
- You are placed on the Individual Insolvency Register, which is searchable by anyone.
- You cannot borrow more than £500 without disclosing that you are in a DRO.
- In most cases, the DRO lasts for 12 months, although restrictions can be extended if misconduct is found.
- Not all debts can be included — for example, student loans, child maintenance arrears, and most court fines are excluded. Benefit overpayments are generally included, but if they resulted from fraud, they won’t be written off when the DRO concludes.
Before You Consider a DRO — Have You Checked This First?
Before considering any formal debt solution, a useful first step is to check whether your debt may be Statute Barred. If your debt is more than six years old, you haven't made any payments towards it, haven't acknowledged it in writing, and it hasn't gone to court, it may be statute barred. In some cases, this can mean the debt is no longer enforceable in court and may be addressed with a simple letter.
My Debt Is Not Statute Barred — What Are My Alternatives to a DRO?
If your debt isn't statute barred and you've fully understood what a DRO involves — including the potential impacts on your credit file, your business, and your daily life — it's time to consider whether there are less extreme alternatives that might suit your situation better.
Token Payments and Unsecured Debt Options
If your debts are unsecured — such as credit cards, personal loans, overdrafts, and payday loans — you have more options than you might realise. Under the Financial Conduct Authority (FCA) Consumer Credit sourcebook (CONC), which is part of the FCA Handbook, creditors are expected to treat customers experiencing financial difficulty with forbearance, which may include accepting reduced or token payments based on affordability. This helps keep creditors informed of your intentions while protecting you during a challenging period.
That's just one option. We've reviewed a complete range of approaches to managing unsecured debt in our 'I need help with debt' section, covering the pros and cons of each without any creditor or debt collector bias. The key point is this: for some people, it may be possible to manage the situation without resorting to insolvency.
Important reads
Why Insolvency Is Often Considered a Last Resort
Any form of insolvency, including Debt Relief Orders, should never be entered into lightly. The impact on your credit file, your ability to borrow, and your everyday financial life can be significant. If those consequences aren't fully understood before you commit, they can be a sudden and unwelcome shock.
At The Real Debt Guy, we're never here to make decisions for you. We're here to ensure there are no gaps in the information you're receiving before you make that decision. Knowing all the options and which one fits your specific situation is the difference between a decision you feel confident about and one you later regret.
TRDG has your back.