Debt Relief Order (DRO)
A Debt Relief Order (DRO) is an agreement designed to help people with little to no spare income, who don’t own their home, and have debt of £50,000 or less, pay it back over time.
What is a DRO?
Set up through a DRO adviser and the Insolvency Service, a Debt Relief Order allows payments to be paused on the debts you owe for a period of 12 months.
Once you’re in a DRO, your creditors can’t force you to make any payments, and they can no longer pursue you for the debts.
Is there a set up fee?
No - As of the 6th April 2024 there is no longer an application fee for a DRO
Can you get a mortgage or other credit with a DRO?
You won’t be able to get a mortgage while you have a Debt Relief Order in place.
It’s extremely unlikely you would meet the mortgage lenders’ strict affordability and creditworthiness criteria. If you did, owning a home would make you ineligible for the DRO.
If you’re hoping to obtain credit, you will face similar problems. Your disposable income of less than £75 means that you are unlikely to be able to afford the repayments, so you won’t pass the affordability checks that lenders will perform.
Advantages & Disadvantages
Advantages
✅ Legally binding agreement
✅ Protects you from legal action
✅ Gives you time to deal with debts
✅ Usually over with in 12 months
✅ Unaffordable debts are cleared
Disadvantages
❌ Entered into public register
❌ Unsuitable for homeowners
❌ DRO restrictions can last over 2 years
❌ Restricts your borrowing to £500
❌ Will impact credit rating