What is a Debt Relief Order, or DRO?

A Debt Relief Order is a way to deal with debts if you can't afford to pay them. Find out how Lowell will work with you if you need a Debt Relief Order.

At Lowell, we help people deal with their Lowell debts every day. We understand that sometimes you might need more support with your debts, which is when we will refer you to sources of free debt advice where solutions like a Debt Relief Order may be discussed.

We’ve put together this impartial guide to share more information about what Debt Relief Orders are, and how they work. It’s important to remember that a DRO may not be right for everyone, so always seek independent advice before taking any further steps.

What is a Debt Relief Order?

A Debt Relief Order, or ‘DRO’, is a way to deal with debt if you can’t afford to pay one or more debts. They are intended for people on a low income with limited assets.

If you don’t own your home and don’t own many valuable possessions, a DRO may be a way to help you get back on your feet if you’re having difficulty paying your debts.

If you meet the criteria, you may be able to apply for a Debt Relief Order, which lasts for a set period, usually around 12 months. At the end of that period, if your circumstances are still the same, the debts included will be written off.

If you’re worried about a debt that’s owned by Lowell, we can offer plenty of support to try and help. Check out our guide on the kinds of debt support that are available, or speak to one of our friendly team members. Our team is trained to be considerate and helpful of your situation, and at Lowell we’ll always take the time to listen and try to understand.

If you’re planning on applying for a Debt Relief Order, let us know, and we’ll see if there’s anything we can do to make things easier for you. No matter what your circumstances may be, we’ll always try to help, and let you know what support we can offer.

Can I apply for a Debt Relief Order?

The criteria for being able to apply for a Debt Relief Order have recently changed, increasing the maximum value of debts covered by a DRO.

You can apply if:

• You have eligible debts totalling £30,000 or less
• You have less than £75 a month spare income after paying tax, National Insurance and normal household bills
• Your assets are worth less than £2,000
• You do not own a vehicle worth £2,000 or more
• You’ve lived or worked in England and Wales in the last 3 years

It’s worth bearing in mind that while your possessions can’t be worth more than £2,000, you can own a personal domestic vehicle that’s worth under £2,000 on top of that.

There are a few things that stop you from being able to apply for a DRO. You also won’t be able to apply for a DRO if:

• You’ve had a Debt Relief Order in the last 6 years
• You have an Individual Voluntary Arrangement (IVA) or you’re currently applying for one
• You’re bankrupt, or your creditors have applied to make you bankrupt, or you’ve petitioned for bankruptcy.

How does a Debt Relief Order work?

When you get a Debt Relief Order, it works by freezing named debts, including any interest on those debts. While the DRO is in place, you won’t have to pay anything to any of the creditors listed in the DRO, and they won’t chase you for any of those debts. At the end of the DRO, if your circumstances are still the same, all of the debts included will be written off. You’ll still need to pay your usual bills and rent, as well as any debts that aren’t covered by the DRO.

If you have a DRO, Lowell will support you by giving you the time and space you need to get back on your feet. If you have any questions about getting a Debt Relief Order on debts that are owned by Lowell, speak to your debt adviser, or get in touch with our supportive team.

It’s worth bearing in mind that if your finances improve to the point that you’re able to start paying off your debts, your DRO might be ended.

There are also a few restrictions when you’re under a DRO – you won’t be able to borrow more than £500 without telling the lender about the DRO, and you can’t create, manage or promote a company without the court’s permission. You cannot act as the director of a company and you cannot manage a business without telling those you do business with about your DRO. If you apply for a new bank account, you may also have to tell the bank about your DRO.

What debts can be included in a Debt Relief Order?

A Debt Relief Order can cover most kinds of debt, including, according to StepChange, these kinds of debts:

• Household utility bills
• Rent arrears
• Council tax
• Loans and overdrafts
• Credit card and store card debt
• Catalogues
• Income tax and National Insurance contributions

If you have one or more of these debts being managed by Lowell and you have concerns about being able to repay them, get in touch and we’ll do all that we can to help and support you. We may be able to pause your payments and give you breathing space.

What debts can't be included in a Debt Relief Order?

Some debts can’t be covered in a Debt Relief Order, such as:

• Child maintenance arrears or anything you own under family proceedings
• Criminal fines or court fees
• Magistrate’s Court fines
• Unpaid TV license fees
• Student loans
• Any debts you incur after the DRO is granted
• Social Fund loans

If you have any questions about what debts can be included in a DRO, get in touch with a free debt advice service or specialist.

Debt Relief Orders and rent arrears

If you’re applying for a DRO and including your rent arrears, it’s very important to check your tenancy agreement and speak to a debt advice expert about any arrangements with your landlord. Citizen’s Advice has more information on this.

Some tenancy agreements have something called an ‘Insolvency Clause’. If your agreement has a clause like this and you take out a DRO, you’d technically be breaking that part of your agreement, which could lead to eviction proceedings. It’s also worth noting that if you put rent arrears into a DRO and don’t have any arrangement to pay the rent arrears, your landlord may be able to start court action against you. Find out more at the National Homelessness Advice Service.

If you’re not sure how a Debt Relief Order could affect your rent and housing, speak to a specialist debt advice service like StepChange or National Debtline.

How to apply for a Debt Relief Order

You can’t apply for a Debt Relief Order on your own. To get one, you’ll need to speak to an approved debt adviser. Most debt advice services, like StepChange or National Debtline, can put you in touch with authorised advisers who can help. A full list of organisations who can help you find an approved debt adviser can be found on the UK Government website.

When you’ve found a debt adviser, they’ll help you apply for a Debt Relief Order. You’ll then get a DRO from the ‘official receiver’, who is an officer of the bankruptcy court. A Debt Relief Order costs £90, which can be paid in instalments over six months.

How long does a Debt Relief Order take to process?

Once you’ve submitted with the help of your DRO adviser and paid the £90 fee, it might only take a few days to have your application approved.

Technically, the 12-month period that is usually set as part of the order is the processing time for the DRO, called a ‘moratorium’ – that’s the time that the restrictions will apply. Once this period is over, the debts in the DRO that you can’t afford will be written off.

What are the advantages of a Debt Relief Order?

• It gives you 12 months to get back on your feet without creditors trying to contact you
• You don’t pay anything towards qualifying debts for 12 months, and they’ll be written off at the end of those 12 months
• Creditors listed in the DRO won’t take any action against you without the court’s permission
• You don’t have to go to court to get one
• It is an alternative solution to being declared bankrupt, which can cost up to £680

What are the disadvantages of a Debt Relief Order?

• If you own your own home, or have some assets, you won’t be able to apply
• It only covers certain kinds of debt, so you may still have to pay your other debts even while you’re covered by the DRO
• You have to pay the £90 fee before your application can be submitted – there aren’t any discounts or exemptions available, so if money is really tight you might have to wait to apply for a DRO
• A DRO will appear on a public register, and will stay on your credit file for 6 years. This could affect your credit score and ability to obtain credit in the future – but see our guide on how to improve your credit score for help and support
• It is only available if you owe less than £30,000 (£20,000 in Northern Ireland) and live in England, Wales or Northern Ireland

You can find more information about Debt Relief Orders through places like Citizen’s Advice or StepChange. If you have more questions about debt support, or need more guidance on how debt works when you’re working with Lowell, take a look at our Debt Guidance hub or check out our guide to Your Next Steps.

First published: 15th July, 2022