Debt Relief Order | Know how to Apply for a Debt Relief Order in UK

What is a debt relief order? A debt order or DRO in the UK is the new form of the insolvency measure. When you have a lower level of debt, then a debt relief order helps you to write off the debt. Hence, the DRO provides you a reasonable amount of time to repay. 

But you should know that it not only has multiple benefits but also there are some risks. Fees are also associated with a debt relief order or DRO. Before applying for a DRO, make sure to check whether you are eligible for it or not, how does it work and how long does a debt relief order take to process. Here is a detailed overview of a debt relief order UK. 

What are the Benefits of a DRO?

In a debt relief order or a DRO, you will find many attractive benefits and those are mentioned below. 

  • If you are in bankruptcy, then the DRO will be very helpful for you as you can find it a low-cost alternative to it. 
  • Because of DRO, you don’t need to pay any amount towards your debts for the 12 months and then it will be written off. 
  • Your creditors are unable to force you for the debts during that 12 month period. 
  • You should also note that a DRO is one type of formal solution to debt. During the DRO, you are not required to appear in a court. 
  • You can not face any court hearing and will be able to relieve the stress and anxiety. 
  • After a year you will be able to make a fresh start and you can include most of the debts in the DRO. It includes your priority debts such as Council Tax, Energy Debt, and many others. 
  • Without the court’s permission, DRO creditors can not take further action against you. 
  • When you have a DRO, you do not have to pay monthly. 

Cons of Debt Relief Order:

There are quite a few disadvantages to the debt relief order as well. To know them, have a look below: 

  • There are many debts that can not be written off. 
  • If you have your own home, then you can not apply for it as this counted as an asset. 
  • Sometimes, you might forget about the debt and you can not add it in later. 
  • All the information about your DRO to the Individual Insolvency Register is found here and the DRO will also record your credit reference file. 
  • If you are dishonest or make any unfit conduct, then you will have to face ‘debt relief restrictions order’. 
  • The official receiver can make a criminal action against you as they have that authority to do so. 

What are the Criteria to Eligible for a DRO?

There are certain criteria to make yourself eligible for a DRO. Before applying for it, you need to meet those criteria which are: 

  • If you have less than £20,000, then you can apply for a DRO. But make sure that you live in England, Wales or Northern Ireland before applying for it. 
  • It can be possible that you have done business in one of those countries in the last three years. Because of that, you are eligible for a debt relief order. 
  • When you get a DRO, then you will have to pay the Insolvency Service which costs £90. 
  • Before applying for it, make sure that you don’t have a residence. 
  • DRO can affect your credit report negatively as it appears on a public register. 
  • After paying all of your living costs, if you have less than £50, then you are eligible to get it. 
  • In case you have savings over £1,000, then you are not applicable for a DRO. 

Below discussed are some of the situations when you can’t apply for a Debt relief Order:

  • Many times, your creditors try to make you bankrupt. At that time, if the hearing has not taken place, then you are not able to get a DRO. At that time, you might find that your creditors are agreed. That provides you the confidence to apply for it. 
  • When you get a Bankruptcy Restrictions Order, then you can’t apply for it. 
  • It can be possible that you are petitioned for bankruptcy but it is not sanctioned and hence you should not apply for the Debt Relief Order. So, if the judge orders you for debt relief, only then you are capable of getting it. 
  • Make sure that you are not bankrupt currently and you don’t have an IVA already. 
  • You might have a Debt Relief Order or a Debt Relief Restriction Order. Because of that, you are unable to use the DRO. 

What You Have to Pay to Get a DRO?

You should know that a DRO costs £90 but you can get it free from the Insolvency Service. When you completely paid the fee, then you should submit the application for a DRO. 

Debts Can be Paid Off With a Debt Relief Order

You can find some debts that use a Debt Relief Order. Generally, these debts are termed as qualified debts. In those debts money, you owe on are included. Such as overdrafts, credit cards, loans, utility, and phone bills, Council Tax, and many others. 

There are also some debts that you need to pay off with a Debt Relief Order. Some of those debts are Social Fund loans, Student loans, Magistrate’s fine, etc. Therefore, you can go to the free debt adviser in order to know which debts you can include in DRO and which you can’t include. 

What is the Process to Apply for a Debt Relief Order? 

If you want to apply for a Debt Relief Order, then you need to take help from an intermediary. Generally, intermediaries can approve your Debt Relief Order. Then, you will have to spend £90 in order to arrange a Debt relief Order. You are allowed to pay the £90 through installments over six months. After applying and paying the fee, an officer checks whether you are eligible or not and then grants your debt relief order. 

What is the Advice that You Can Get from a Debt Relief Adviser?

If you are planning to apply for a Debt Relief Order, then go to an experienced debt adviser first as it depends on your personal circumstances.  With the help of the debt advisor, you will be able to find the best solution. This will help you to free from debt as early as possible.

  • When you talk about your situation to them, they will treat you say in confidence. 
  • They will then provide you better ways and those will help you to manage the money. 
  • The Debt Advisor will never judge you and you will not feel bad about your situation. 
  • You will get some ways from them on how to deal with debts. 
  • They will always make sure that you have applied for all the benefits or not. In case any entitlements are available and that you missed, then they will make sure that you will get them. 

After talking to a debt advisor, you will be less stressed and you will have more control over your life again. You might have the following conditions before talking to an advisor. 

  • You might overuse your card and unable to find anybody who can lend you.  
  • There are certain things that might be spiraled out of control and it might take much longer to pay back. 

You can contact a debt advisor online or over the phone. Hence, it is the best to talk with the advisor face to face. 

Make Sure that DRO is the Correct Choice for You:

With the help of the Debt Relief Order, you will be able to get a solution to free from the debt. Before applying for it, make sure that you know the impact of a DRO as it has an impact on all areas of your life. 

  1. Sometimes you might have debt because of purchasing a higher amount of goods. It can be possible that you might have to return that good. 
  2. You should keep in mind that your DRO will stay on the credit card for those six years. Because of that, you will find difficulty in the future to find a new home. You might also be unable to get credit in the future. 
  3. It can be possible that you have a tenancy agreement and that can be affected. 
  4. Therefore, you will find that the bank will close your current account and now you need to open a new account. 
  5. If you apply for British citizenship, then it might be affected because of DRO. 

Certain Restrictions to Follow During the DRO Period:

During the DRO period, you will have to follow certain rules. These rules are called restrictions and you must have to follow them during the DRO period. Those are: 

  1. Without informing your creditor about DRO, you can not purchase a thing that costs £500 or more. 
  2. When you are approved for DRO, then you will be restricted to get involved in promoting. At that time, you can not set a limited company. So, if you want to become a company director, then make sure you have court permission. 
  3. When the DRO is in the force, you will find your details on the Insolvency Service’s Individual Insolvency Register after three months. Anybody can view your details easily. 

Is National Debt Relief a Good Choice?

If you are looking for ways to get relief from the credit card debt, then the national debt relief is the best choice for you. In case you want to get relief from a student loan, then also this option is the best choice for you. National Debt Relief helps you to negotiate a settlement that is 30 to 50 percent lower than the total debt. 

What is the Reason to Apply for a Debt Relief?

Debt Relief is not an easy fix and debts can be repaid through basic changes. So, if you face bankruptcy, debt management, then you can seek help from the DRO. 

It can be possible that you might not be able to repay the unsecured debt within five years. Such as credit cards, medical bills, personal loans, etc. Then, debt relief is the best choice for you to get rid of these issues. 

How Long A Debt Relief Order to Take to Process?

The steps will be easier for you if you have the following documents. Some of those documents are wage slips, utility bills, council tax documentation, Lease Agreement and some of the other financial documents. 

Know the Steps to take a DRO:

It is a four-step process and follows them accordingly. 

Step 1: Contact to an Official DRO Advisor

Without an experienced DRO advisor, you are not able to apply for a DRO manually. Only they can understand whether you are eligible for a DRO or not as it has some strictest rules. So, if you want to get a DRO, then make sure that you are qualified with the following criteria. 

  1. First, make sure that you have a resident in Northern Ireland, Wales or England. 
  2. If you are a resident of England and Wales, then the debts should be less than £20,000 and for Northern Ireland, it should be less than £15,000. 
  3. Make sure that you have not purchased any home and the home should not be in the mortgage. 
  4. In case you have any car that should be less than £1000 and also your assets should be less than £1000. 
  5. Your income should be less than £50 per month or a disposable income. 

Step 2: Apply for the DRO

In this step, you should have all your documents ready which we mentioned above. You have to submit some of your personal details like your income, debts, and expenditure. You should not be nervous as the advisor will help you to gather that information. 

It needs to mention that, pay £90 to the Insolvency Service but you are able to pay that amount in installments. Note that before submitting the application formally, you must be paid the entire amount. When you pay the £90 fee, you will get the application from the Official Receiver. 

Step 3: Court Approval

Within 10 working days, your official receiver will process the application and make sure to take any bank holidays into the account. When the Bankruptcy Court gives you permission, then the DRO will be approved. At that time, you will see that all your debts are frozen. This thing indicates: 

  1. You should not make payments to the debts and that includes in the DRO.
  2. At that time you will find that the interest and fees are completely frozen. 
  3. Because of the court approval, your creditors are not allowed to take any legal action against you. Even the creditors are not allowed to contact you. 

If you want your DRO should remain in place for the 12 months, then make sure to cooperate fully with your official Receiver. 

Step 4: End of DRO

After 12 months if there is no change, then the DRO will view you. They will do this in order to know why you are unable to pay off the debts in a certain amount of time. This is the reason why the debts are written off. Hence, you need to keep in mind that you can only include the unsecured debts. You will then find your credit report on your DRO for 6 years. 

Things You Should Not Do:

In this section, we have discussed a few things that you should not do and those are mentioned below. 

  1. If you don’t want to pay an unsecured debt, then make sure that you have not paid a secured debt late. Because of paying late, you can lose the collateral. 
  2. You should not borrow anything that is equal to your home and you should not withdraw money from the retirement savings. 
  3. Make sure that you are not borrowing money from a workplace retirement account. Because this loan will become an extra pressure for you if you lose your job. Due to this loan, you will have to pay the tax bill. 
  4. You should take your own decisions and don’t take the collector’s decision which they are trying to enforce on you. Instead of the collector’s decision, you should take your time to research and then select the best option for you.