Do I qualify for a Debt Relief Order?
A Debt Relief Order (DRO) is something to apply for if you can’t afford to pay your debts. DROs usually last 12 months, during which time creditors cannot reclaim their money without court permission. After 12 months, you’re discharged from the debts covered by your DRO.
To qualify for a DRO you must have resided, had a property or a business in England or Wales at some point in the last 3 years. Furthermore:
- You must owe £15,000 or less in debt.
- You have a spare available income of £50 or less a month after paying normal household expenses.
- You do not own your home and have assets and savings worth £300 or less.
Sounds like you? Well, there’s more to be aware of so let’s address each of the above points in turn:
While you may owe £15,000 or less, not all debts are coverable by a DRO, only “Qualifying Debts.” These include: credit cards, overdrafts and loans; rent, utilities, telephone and council tax; benefit overpayments, hire purchases, conditional sale agreements and buy-now-pay-later agreements.
Debts that don’t qualify include: Court fines, confiscation orders and any other fines relating to criminal activity; student loans and social fund loans; child support and maintenance. These must be paid separately and creditors can still take action against you to reclaim them – even if you have a DRO covering other debts.
When calculating spare available income you must be realistic and be honest, taking into account your wage/salary, benefits (if any), pension and contributions from other household members or rental incomes.
“Normal household expenses” include: national insurance, housekeeping, utility bills and childcare costs but a full breakdown can be found at the Citizens Advice Bureau online.
“Assets” are savings, shares, antiques and property (whether owned outright or mortgaged). Vehicles are included if their value is £1000 or greater. Clothes and other household items, like bedding and furniture or tools and equipment used in your job/business are exempt, as are cars less than £1000 or those specially modified to cater for a physical disability.
Unfortunately not everyone may apply for DROs, such as those already bankrupt or if creditors have applied to make you bankrupt, even if the hearing’s yet to take place (unless your creditors agree to DRO application).
Similarly, you can’t apply if you’ve been given a “Banking Restriction Order” or have an “Individual Voluntary Arrangement” (or are applying for one). If you’ve filed for bankruptcy but have yet to be dealt with, you also cannot apply unless, of course, the judge decides a DRO preferable.
Finally, if you’ve been subject to a “Debt Relief Restriction Order or Undertaking”, or have already had a DRO in the past six years, you cannot apply.
If it still sounds like you qualify, then contact an authorised adviser. They check whether you really do meet the criteria and then apply for the DRO on your behalf (while DROs cost £90 you’re permitted to pay in instalments over six months).