Pros and Cons of the Debt Relief Order
Debt relief order or DRO, introduced by the Tribunals, Courts, and Enforcement Act 2007, is a type of insolvency for individuals struggling to pay off their debt. People with less than £15,000 in unsecured debts have little or no disposable income. They cannot afford to file for bankruptcy either. They have no assets they need to repay.
Are You Eligible for DRO?
You will have to pay £90 for the debt relief order. If you can pay the amount, you need to meet the following requirements for eligibility:
- You owe less than £15,000 to your unsecured lenders
- Your total gross assets do not surpass £300
- After you subtract tax from it, your NI contributions, household bills, and disposable income do not surpass £50 per month
- You reside in England or Wales or have been living there for three years, either as a resident or a business owner
- You have not been subject to an earlier debt relief order within the last six years
- You are not involved in a formal insolvency procedure when you apply for it such as IVA, undischarged bankruptcy order, current bankruptcy restrictions order or undertaking or current DRO or undertaking DRRU or DRRO, and an interim order
If you are eligible for a debt relief order, you need to understand the pros and cons of it.
The Pros and Cons of Applying for the Debt Relief Order
The following are the pros and cons of the debt relief order:
The Pros of DRO
- After 12 months, all your debts on the order will be dismissed.
- You do not have to go to court.
- Creditors cannot go after you.
- You can write off all council tax debt
The Cons of DRO
- There are tight income, asset, and debt restrictions on individuals applying for a debt relief order
- In the event your situation changes, you will still have to continue repaying your creditors
- Your debt relief order will remain on your credit file for six years, thus affecting your ability to obtain credit later
- You cannot promote, manage, or establish a limited company without first taking permission from the court
- You cannot take the position of a company director without first taking permission from the court
If you want to apply for DRO, you will need to follow a process with a regulated IVA company.
The Process of Applying for DRO
Here is the process of applying for DRO:
- Apply to the Official Receiver through the Insolvency Service
- A specialist advisor, an Approved Intermediary, will verify your application on behalf of the Official Receiver and fill out the online application on your behalf
- You will need to pay a non-refundable payment (£90) at a Payzone outlet
- You can make the payment in installments, if you cannot pay in full
- Once the Official Receiver receives the payment and application, they will consider your application
You can stop repaying your debts once you receive an approval for your DRO application.