How it works

You should first seek debt advice, and if a DRO is considered suitable, you will be referred to an approved intermediary*. They will check that your situation fulfils the criteria and will help you complete the online form, and submit it for you to a government official called the official receiver. The official receiver then makes the order, if appropriate.

*An approved intermediary is someone who has been approved by a competent authority chosen by the government.

To get a DRO:

• your debts must not exceed £20,000;
• your assets must not exceed £1000 (certain assets do not count, for example clothing, furniture and a vehicle worth less than £1,000); and
• your surplus income must not exceed £50 a month after paying your essential personal and household spending.

A DRO will last for 1 year, and once your DRO has ended you are released from your debts (with certain exceptions).

Pros

• Your debts will be written off at the end of the DRO. There are a few exceptions, as explained opposite.
• None of the creditors listed in the DRO application can take further action against you without the court’s permission.
• It allows you to make a fresh start after 1 year.
• The fee (£90) is affordable and can be paid in instalments but the fee must be paid before the application can be made.
• You will keep your assets and a vehicle as detailed above.
• The approved intermediary ensures that you are given appropriate advice and that you fit the criteria for a DRO.

Cons

• Your DRO is entered on a public register.
• You can’t have a DRO if you have an existing bankruptcy order, an IVA, are subject to bankruptcy restrictions, or you have had a DRO in the last 6 years.
• You won’t be able to have a DRO if you own a house, even if it has no equity (value).
• You will remain liable to pay certain debts – in particular student loans, fines and some debts arising from family proceedings.
• Your employment may be affected.
• Your DRO could be revoked (withdrawn) if you don’t co-operate with the official receiver during the year your DRO is in force.
• You can’t act as a director of a company or be involved in its management unless the court agrees.
• You will be committing an offence if you get credit of £500 or more without disclosing that you are subject to a DRO.
• You may have a debt relief restrictions order* made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly.

* An order that will place restrictions similar to those in force while subject to a DRO, which the official receiver may apply for.

Source: In Debt? Dealing with your creditors – The Insolvency Service