Debt Relief Orders - A Solution For Your Debt Worries?
A Debt Relief Order (DRO) was introduced in 2009 as a new way of handling unsecured debts. A Debt Relief Order can be thought of as a cheap alternative to bankruptcy. Granted by the Insolvency Service, a DRO costs just £90 to process and can be paid over a period of 6 months. Once a Debt Relief Order has been granted, none of your creditors will be able to take action against you to obtain the money you owe. After 12 months, you will be free of all the debts listed in the DRO agreement so long as your circumstances remain the same and you can't repay the debts back at a reasonable amount each month.
Credit Restrictions
Similar to bankruptcy, if you want to secure credit of more than £500 then you will need to advise the lender that you are subject to a DRO. Likewise, if you don't adhere to the terms and conditions of the Debt Relief Order, then the Official Receiver can impose longer restriction times from 2 to 15 years.
What Does a Debt Relief Order Cover?
A Debt Relief Order covers personal loans, overdrafts and store cards. Utility arrears, rent, buy now - pay later agreements, hire purchase and conditional sale agreements also qualify under a DRO. Unfortunately, student loan debts, outstanding court fines and child maintenance payment debts are not covered. A Debt Relief Order is perfect for anyone with unsecured debt.
Who Should Consider Debt Relief Orders?
A Debt Relief Order isn't suitable for everyone and there are strict criteria to meet in order to be eligible. If you own a home, have assets over £300 or own a vehicle worth more than £1,000 then you can't take out a DRO. Similarly, if you have more than £50 available income at the end of the month after paying household expenses, then your DRO application would be rejected. There are also restrictions in place regarding the size of your debt; if you owe over £15,000 to creditors then you will need to seek an alternative debt management solution. Essentially, a Debt Relief Order is designed for the very poorest members of society who simply can't afford to live unless their debts are wiped clear.
Related Articles:
Site is for information only and does not constitute financial advice. E&OE.
