Debt Relief Order (DRO)

A Debt Relief Order (DRO) is a formal insolvency process in the UK designed for individuals with limited assets and very low income. It provides debt relief by halting debt repayments for 12 months, after which eligible debts may be written off.

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A Debt Relief Order (DRO) is a UK debt relief solution providing financial respite to individuals overwhelmed by unmanageable debts. DROs are designed to help people regain control of their finances, offering a much-needed breathing space

In this guide, we'll look into the specifics of Debt Relief Orders, outlining the types of debts eligible for inclusion in a DRO, and the process of applying for this debt relief solution. We'll also explore alternative options available to people in the UK who are looking for a way to deal with unaffordable debt.

What is a Debt Relief Order?

A Debt Relief Order (DRO) is a formal and legally-binding debt solution available in England, Wales, and Northern Ireland. It's designed for individuals facing overwhelming debt, but with little income or assets to their name.

Once approved, a DRO will give you a temporary reprieve from your debts. You will be protected from legal action by your creditors, which can provide you with the breathing space you need to regain financial stability.

At the end of the 12-month DRO period, if your financial situation remains unchanged, any debts included in the DRO will be written off.

Who is eligible for Debt Relief Orders in the UK?

To be eligible for a Debt Relief Order (DRO) in the UK, you must meet specific criteria, including:

Residency: You must be a resident of either England, Wales, or Northern Ireland. DROs are not available in Scotland.

Debt level: Your unsecured debts should be below £30,000 in total, or £20,000 in Northern Ireland.

Assets: You should have very limited assets and possessions. Your assets, excluding items essential for daily living (such as clothing and household items), should be valued at no more than £2,000 (or £1,000 in Northern Ireland.

Disposable income: Your disposable income (the money left after covering essential living expenses) should be low, typically under £75 per month, or £50 in Northern Ireland.

Previous DROs: You should not have had another DRO within the last six years.

If you’re unsure whether you meet the above criteria, it's important to consult with a debt advisor or Insolvency Practitioner who can assess your unique financial situation and guide you through the DRO application process.

Debts included in your DRO

The debts that it's possible to include in a DRO are called 'qualifying debts'. Once these debts are added to your arrangement, your creditors can't force you to repay them.

Qualifying debts for a DRO include:

  • Credit cards
  • Payday loans
  • Overdrafts
  • Council tax arrears
  • Income tax arrears
  • Unpaid national insurance contributions

Debts excluded from your DRO

There are some debts that can't be included in your DRO, which means they will remain your responsibility.

Debts that are excluded from a DRO include:

  • Secured loans arrears (Loans that are secured against an asset like your home)
  • Mortgage arrears
  • Rent arrears
  • Criminal fines
  • Student loans
  • Child Maintenance Payment arrears

How to apply for a DRO

The process of applying for a Debt Relief Order will usually involve the following steps:

Seek debt advice

Start by seeking professional debt advice. Make sure to consult with a qualified debt adviser, debt advice company, or an organisation like StepChange debt charity. They will help you understand if a DRO is the right solution for your financial situation.

Work with a DRO adviser

Your next step is to work with a DRO adviser. These are approved intermediaries who are skilled debt advisers, and the debt advice . They will guide you through the application process and ensure that a DRO is the right choice for you.

Start formal insolvency procedure with the Insolvency Service

Your DRO adviser will help you initiate the formal insolvency procedure by submitting your application to the Insolvency Service. There's typically a £90 application fee, and you can apply online.

Moratorium on your debts

Once your DRO application is approved, there is a 12-month moratorium, during which your creditors cannot take any legal action to recover their debts. This period offers you a breathing space to deal with your financial situation.

Discharge from DRO

If your financial circumstances haven't improved by the end of the 12-month period, you will be discharged from the DRO, and the included debts will be written off.

Restrictions during a DRO

There are several restrictions that will impact your life and finances while taking part in a DRO. You need to pay towards any secured debts, like mortgages or car loans, during the arrangement, as DROs only cover unsecured debts. 

Employment restrictions prevent you from acting as a company director or working within specific industries without disclosing your DRO to your employer. You will also need permission from the court to set up a limited company while you're in an active DRO - this helps to prevent potential mismanagement of a new company while your existing debts remain unresolved. 

If you fail to cooperate with any of these DRO restrictions, or you do not provide information that accurately reflects your financial circumstances upon entering the DRO, it’s possible for creditors to request a Debt Relief Restriction Order (DRRO) extending restrictions for up to 15 years.

Does a DRO affect your credit rating?

Using a Debt Relief Order (DRO) will significantly impact your credit rating. When you enter a DRO, it is recorded on your credit report and remains there for six years. This negatively affects your credit rating and makes it challenging to access credit or financial services during this period. 

Potential lenders may view you as a higher credit risk, making it more difficult to secure loans or credit agreements, and those that are available might come with higher interest rates in order to reduce the risk to the lender. 

That said, if you have successfully completed your DRO, your credit rating should gradually improve once this six-year period passes, allowing you to gradually rebuild your financial standing.

Advantages and disadvantages of a Debt Relief Order

Before you enter a Debt Relief Order, it’s important to take all of the potential advantages and disadvantages into account. We’ve laid out some of the key pros and cons below. 

Advantages of a Debt Relief Order (DRO)

  • Provides legal protection from creditors’ actions and debt enforcement
  • Discharges included debts after 12 months, offering a fresh financial start
  • Affordable, with a low application fee and no ongoing monthly payments
  • Suitable for individuals with limited assets and very low income
  • Relatively simple to set up through a DRO adviser and the Insolvency Service

Disadvantages of a Debt Relief Order (DRO)

  • Restricts financial activity, including obtaining credit without approval
  • Listed on public registers which will damage credit rating for six years
  • Potential for creditors to challenge the DRO, delaying the debt relief process
  • Some debts, like student loans and court fines, aren’t eligible for inclusion
  • Limited asset value and income criteria may exclude some individuals from eligibility

Alternatives to a Debt Relief Order (DRO)

When considering debt relief options in the UK, Debt Relief Orders are just one of several possible routes. Here are some alternative debt solutions:

Individual Voluntary Arrangement (IVA)

An IVA is another formal insolvency procedure. Individual Voluntary Arrangements allow you to enter into a legally-binding agreement with creditors to make reduced payments towards your unsecured debts over a set period, usually five or six years.

After this, any remaining debts included in the arrangement are written off.

Debt Management Plan (DMP)

A DMP is a flexible solution for individuals who can afford to repay their debts if given more time. It involves consolidating multiple debts into one affordable monthly payment, which may be on reduced terms, and giving you the time and space to pay your debts in full.


Bankruptcy is an insolvency process suitable for individuals who can't afford to make their debt repayments and see no other way to pay back what they owe. It involves surrendering assets, and results in the discharge of debts, which can help on your journey towards a debt-free life.

Bankruptcy carries significant financial and legal consequences, however, meaning it should be seen a last resort for those owe money they have no reasonable way of repaying.

Key Takeaways

  • DROs help those with overwhelming debt but limited income and assets
  • There are strict eligibility criteria, including on debt levels, assets, and disposable income
  • Once qualifying debts are included, creditors can't pursue you for them
  • The application process involves working with an approved DRO adviser
  • If you use a DRO, it will be listed on your credit report for a period of six years
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