This guide explains what a debt relief order (DRO) is and how it works. A DRO is an insolvency solution to help people in England and Wales who cannot pay their debts. It can stop most creditors from taking further action against you and can help you to get a fresh start as most debts are written off after one year.

Use this guide to:

• understand what a DRO involves;
• check if you qualify for a DRO;
• see which debts a DRO covers; and
• understand how a DRO affects you.

This guide includes some useful contacts and links for you to get further help.

The sample letters mentioned in this guide can be filled in on our website.

How do I apply for a DRO?

To apply for a DRO, you need help from an approved intermediary. This is a specialist adviser that is authorised to send your application to the Insolvency Service. 

Are DROs free? 

Yes, it is completely free to apply for a DRO. The approved intermediary assists you without charge and there is no application fee to pay to the Insolvency Service. 

How do I find an approved intermediary?

If you want to apply for a DRO, contact us for more advice. If a DRO is a suitable solution for you, we can refer you to an approved intermediary. 

Who decides if my DRO is approved? 

After your application is submitted, a government official known as the official receiver will decide whether to approve your DRO. 

Joint applications

You cannot apply for a DRO jointly with another person. If you and your partner both want a DRO, you must each apply separately. Contact us for advice.

When can’t you apply?

You will not be eligible for a DRO if you:

• are already bankrupt;
• are in an individual voluntary arrangement (IVA) or an interim order has been made to protect you from creditor action while you wait for an IVA to be approved;
• are subject to a bankruptcy restrictions order or undertaking, or a debt relief restrictions order or undertaking; or
• have a bankruptcy petition pending against you, unless a court has referred you for a DRO.

If you are not eligible for a DRO, contact us for advice on what solutions are available for you to deal with your debts.

Do I qualify for a DRO?

You will need to meet all of the following conditions to qualify for a DRO.

• You are unable to pay your debts.
• Your qualifying debts do not total more than a debt threshold of £50,000. To check if your debts are qualifying debts, see the later section Which debts are included in a DRO?.
• Your assets are not worth a total of more than £2,000. When you add up the value of your assets, you can leave out the value of a single domestic vehicle worth less than £4,000. For more information, see the later section Assets.
• You have £75 a month or less spare income after normal household expenses are taken into account.
• You live in England or Wales (or have lived or run a business in England or Wales in the last three years).

How many DROs can I have?

There is no limit to the number of DROs you can have. However, you will not qualify if you have had a DRO in the last six years that was not cancelled.  

Which debts are included in a DRO?

You can include most types of debt in your application as long as your total debts are no more than the £50,000 debt threshold.

Priority debts

You should include priority debts. Examples include:

• rent arrears;
• gas and electricity debts with your current supplier;
• arrears on your phone bill if you need to keep it as an essential service;
• council tax, business rates and community charge arrears; and
• income tax, VAT and National Insurance arrears.

Arrears on priority debts

When you are working out how much you owe, make sure you include any arrears you have on priority debts. You will need to pay your ongoing rent, energy, council tax bills and so on as normal.

Credit debts

You usually need to include all your credit debts in the application. If you leave a debt out, it cannot be included later. See After your application is sent in the later section The DRO application.

Examples of debts you may include are:

• water arrears;
• credit cards and store cards;
• bank overdrafts and bank loans;
• buy now pay later debt
• home-collected credit;
• benefit overpayments;
• family or personal debts;
• hire agreements;
• parking penalty charges; and
• mortgage shortfalls (money you owe if your house was sold for less than the outstanding mortgage).

You may also owe debts from a small business such as:

• money owed to employees;
• debts to customers who have paid for goods or services that were unable to be supplied; and
• debts to suppliers.

Benefit overpayments

Benefit overpayments cannot be recovered by any method, including deductions from your ongoing benefits, if they are included in a DRO.

Debts incurred through fraud 

Qualifying debts incurred through fraud have to be included in your DRO and count towards the £50,000 debt threshold. When a debt incurred through fraud is included in your DRO, the creditor cannot take action against you until your DRO ends. When your DRO ends, the debt will not be written off and the creditor will be able to take action to recover the debt. 

Debts to include

If you are not sure what debts you should include in the DRO application, contact us for advice.

Excluded debts

Some debts do not count towards the £50,000 debt threshold, although you still have to list them in the DRO application. This means you are still liable to pay these debts in full. You cannot include:

• magistrates’ court fines;
• maintenance, Child Support Agency (CSA) and Child Maintenance Service (CMS) payments and arrears;
• student loans;
• budgeting loans and crisis loans;
• money owed under a ‘criminal confiscation order’; and
• debts resulting from certain personal injury claims against you.

You will need to make sure you pay ongoing payments on these debts and include them in your outgoings.

Hire purchase and conditional sale

If you are not in arrears with your hire purchase (HP) or conditional sale agreement, you can choose to exclude the whole balance of the debt from your DRO application. If you decide to leave an HP or conditional sale agreement out of your DRO application, payments towards the agreement will only be an allowable expense if:

• the agreement is for a vehicle worth less than £4,000;
• the agreement is for an item that is needed to cover a basic domestic need; or
• you have a disability and the agreement is for a vehicle that has been adapted for your use.

If the HP or conditional sale agreement is for a vehicle that is worth £4,000 or more and it has not been adapted because of a disability, payments will not usually be an allowable expense.

If a payment towards the agreement is not an allowable expense, it means you will need to include the debt in your application unless:

• a third party, such as a family member or friend, is willing to take over the payments for you; or
• the payment is £75 per month or less and you have the spare income to pay this.

If you are in arrears with your HP or conditional sale agreement, you must include the arrears in your DRO application.

For more information on HP or conditional sale agreements and DROs, contact us for advice.

What if my debts are near the £50,000 debt threshold?

Creditors can add interest and charges to your debts up until the date the official receiver approves your DRO. Therefore, if your debts are near the £50,000 debt threshold when you start the application process, your debts could rise to above £50,000 by the time the official receiver considers your application. If this happens, the official receiver will not approve your DRO.

You should consider the following and get further advice.

• Check what sort of debts you have. Some creditors may not be adding extra interest and charges. But you may have a credit card or a store card which has a high interest rate that is building up each month.
• Try to persuade your creditors to freeze the interest. You can send your creditors the sample letter Hold action while you apply for a debt relief order. However, this letter should only be sent to your creditors when you have an approved intermediary dealing with an application for you.
• If you are able to, make payments to your creditors to prevent the debts reaching the £50,000 debt threshold. Contact us for advice as you need to be careful to treat all your creditors fairly if you decide to do this.
• Think about whether anyone can help you make the payments to help keep your debt below £50,000.
• You may be able to apply for a time order. This is a way of asking the court to give you more time to pay a particular type of debt, which may help to prevent the debts reaching the £50,000 debt threshold. See our Time orders on unsecured debt guide for more information.
• With a time order, the court can also change some of the terms of the agreement, such as the rate of interest. This is a complicated area, so contact us for advice.

Assets

You can have assets worth up to an asset threshold of £2,000 and still qualify for a DRO. Lots of basic household items such as cutlery, crockery, cookers, televisions, beds or furniture do not count as assets.

The value of your assets is worked out using the resale value, not how much the item was worth when you bought it, unless it is brand new. Assets may include antiques, luxury items or valuable collections, stocks, shares, premium bonds and savings.

If you own a vehicle that you use for domestic purposes, your adviser will need to check the value using Parker’s Guide. See Useful contacts towards the end of this guide. If the vehicle is worth less than £4,000, it will not be taken into account as an asset.

If your vehicle has been specially adapted because of a disability, it may still be possible for you to qualify for a DRO even if it is worth £4,000 or more. If this affects you, contact us for advice.

DROS and pensions

Pensions approved by HM Revenue and Customs (HMRC) do not count towards the £2,000 asset threshold. A small number of pensions not approved by HMRC will count as assets.

If you are 55 years old or older and can draw part or all of a pension as a lump sum, the value of your pension may affect whether you qualify for a DRO. Contact us for advice if this affects you.

Any regular payments you receive from a pension will be treated as income when deciding whether you qualify for a DRO.

Cars on hire purchase or conditional sale agreements

Don’t include a car you have on a hire purchase or conditional sale agreement as an asset. The car belongs to the creditor until you have paid off the total debt. Don’t forget to count the balance you owe in your list of debts.

The DRO application

Before making your application, you will need to think about the following steps.

• Getting advice about whether you may qualify.
• Completing a personal budget to see how much money you have coming in and going out. Use My Money Steps to work out your budget.
• Collecting details about your debts and how much you owe each creditor.
• Checking your credit reference file to make sure you haven’t forgotten any debts.

Listing debts

It is important that you provide accurate amounts for what you owe when you apply for a DRO. This is because the official receiver will only include the amount of debt that is stated on your application form in your DRO.

If you use an out-of-date statement to find out how much you owe a creditor, you may find that the creditor asks you to pay the difference.

For example, if you have a credit card debt that was £3,200 when you complete an application form and some interest gets added on that takes the debt to £3,225, the creditor may ask you to pay the extra £25.

Ask your intermediary when they will submit your application to the official receiver. If there is a delay between you filling in an application form and your approved intermediary sending the application form, it is a good idea to provide up-to-date balances just before your final application is submitted.

After your application is sent

• The official receiver will decide whether to grant your application for a DRO. They can ask you for more information and you must be as helpful as you can. You may want to seek more advice if this happens. Contact us for advice.
• The official receiver will also ask a credit reference agency for information about your credit file. This will help them to check the details that you have provided in your application.
• If the official receiver approves your application, they will send you a letter to confirm that you have been given a DRO.
• The official receiver will also send the order to all the creditors listed in your application.
• Your creditors may object to the DRO being made. They can also object to being included in the DRO or to the details of their debt as listed in the DRO. They can only make such objections on certain grounds, for example that you are not eligible for a DRO. It is not a valid ground for a creditor to object just because they don’t want to be included in the order.
• If your DRO stands, all the debts that are included in the order are put on hold for 12 months. This is called the ‘moratorium period’.
• You should not usually make any more payments on your debts. There are some exceptions to this rule (for example in some situations if you have rent arrears). Contact us for advice.
• Your creditors that are included in the order are not usually allowed to ask you to make any more payments. If this happens, tell the creditors about your DRO using our sample letter Creditors asking for payments after debt relief order approved. You should also let the official receiver know. Contact us for advice.
• If your application is rejected, the official receiver will tell you and your intermediary the reasons.

Future statements from creditors

Under the rules in the Consumer Credit Act 1974, your creditors will usually have to keep sending you annual statements, as well as arrears and default notices in a set format. This will happen even when you are in the 12-month moratorium period under your DRO but should stop after that. Don’t worry. This does not mean that there is a problem with your DRO. If you receive other letters demanding payment, contact us for advice.

What happens if a debt is left out?

If you forget about a debt and find out about it after the DRO has been agreed by the official receiver, the debt cannot be included in the DRO. The creditor can continue to take action against you to recover the debt. This means you will need to negotiate repayments separately with that creditor. If this happens to you, contact us for advice. If this debt takes your total debts over £50,000, the official receiver will consider ending or ‘revoking’ your DRO.

The official receiver

It is very important that you co-operate with the official receiver throughout your DRO application.

• You must tell the official receiver about any changes in your circumstances after you apply for a DRO.
• You must give information about your finances to the official receiver if they ask.
• Make sure you have given the official receiver a full list of your debts and assets.
• Tell the official receiver if your income increases, or if you come into any property or a lump sum whilst you have a DRO.

How does a DRO affect me?

A DRO can be a big help if you’re struggling with personal debt and have a low income. It stops most creditors from taking action against you. When the DRO ends, your qualifying debts are written off unless they were incurred through fraud. DROs are free and usually much simpler than alternative insolvency solutions that offer debt write-off, such as bankruptcy.  

However, a DRO also comes with some important restrictions and possible impacts that you need to be aware of before applying. 

What restrictions will be placed on me?

Certain restrictions will be placed on you for 12 months from when the DRO is approved. The main restrictions are as follows.

• You must not take out credit of £500 or more without telling the lender that you have a DRO.
• You cannot run a business in a different name without telling everyone you do business with the name you used for your DRO.
• You cannot be involved with the promotion, management or formation of a limited company, or act as a company director without getting permission from the court.
• You may not hold certain public offices.
• You cannot apply for a DRO again for six years.

Debt relief restrictions orders

If the official receiver finds that you have not been honest and open about your finances either before or during the DRO, or they decide that you have behaved irresponsibly, they may ask you to agree to a debt relief restrictions undertaking (DRRU). If you refuse, they may apply to the court for a debt relief restrictions order (DRRO).

A DRRU or DRRO means that you will still have certain restrictions on you for between 2 and 15 years after the date of the DRO. Your details will also be kept on the Individual Insolvency Register for the lifetime of the order plus an extra three months. See What is the Individual Insolvency Register and how long will my details be on it?.

What will happen to my bank account?

If your DRO application is successful, your bank account will not necessarily be frozen. It will be up to your bank or building society to decide if you are allowed to keep the account open. If you have a debt with your bank or building society, it is likely that your account will be frozen after your DRO is approved. Even if you do not have any debts with your current bank, your account may still be at risk. Check the terms and conditions of your account and contact us for advice.

There is nothing to stop you applying to open a new bank or building society account when you have a DRO, but the bank or building society may ask you if you have a DRO. It is then up to the bank or building society to decide whether they will let you open an account with them. You may be able to open a basic bank account instead. It is a good idea to open a basic bank account after your DRO is approved to try to avoid any problems. See our Safe bank accounts guide for more information.

How will a DRO affect my credit rating?

Credit reference agencies keep information on DROs for six years in the same way as they do for most other information. See our Credit reference agencies guide for more information.

Even after six years, your ability to get a mortgage could be affected. This is because some lenders may ask if you have ever been made bankrupt or had a DRO.

What is the Individual Insolvency Register and how long will my details be on it?

The Individual Insolvency Register is a register that holds details of people that have used an insolvency solution to help deal with their debts. The register can be searched by members of the public and holds details such as: 

• the type of insolvency solution you are in and when it started; 
• your name; 
• your address; and 
• your date of birth. 

Your details will be held on the Individual Insolvency Register for the 12 months your DRO lasts, plus an extra 3 months. This means 15 months in total.

Your details may be held on the register for a longer period if you are subject to a DRRU or DRRO. See What restrictions will be placed on me?. 

Stopping your address being published on the register if you are at risk of violence

If having your address on the Individual Insolvency Register might put you or a family member living with you at risk of violence, you can apply for an order to prevent your address being published. You will need to obtain a person at risk of violence (PARV) order before your DRO application is submitted. Tell your approved intermediary that you will need a PARV order and they will let you know how to apply. 

Will a DRO affect my job? 

Although it is not common, some jobs can be affected by a DRO. For example, there may be a higher risk to your employment if you work in the financial industry. Check your contract of employment to see if it states that you are not allowed to have a DRO. 

Does a DRO affect my tenancy? 

If you rent your home, check the terms and conditions of your tenancy agreement or occupation contract. It may say that your landlord can end your tenancy or occupation contract if you enter into a DRO. Even if your tenancy agreement or occupation contract does say this, your landlord may choose not to end your tenancy or occupation contract, especially if you are up to date with your rent payments. 

Is there any risk to my immigration status if I have a DRO? 

If you are applying to stay in the UK or for British citizenship, a DRO can impact on your immigration status. If you are concerned that this may affect you, you should seek specialist immigration advice. For information on how to find an immigration adviser, see the GOV.UK page Find an immigration adviser. 

What other solutions are there?

If you do not qualify for a DRO, there may be other solutions available to deal with your debts such as bankruptcy, a debt management plan or an individual voluntary arrangement. National Debtline can advise you on the solutions available to you in your circumstances. Contact us for advice.

FAQs

Does a DRO clear all debts?

A DRO clears most types of debt. Whether a DRO will clear all of your debts will depend on the debts you have. 

The following debts cannot be included in a DRO. 

• Child maintenance or anything you owe under family proceedings  
• Student loans 
• Court fines 
• Budgeting and crisis loans from the Social Fund 
• Debts secured against any possessions you own 
• Compensation owed for causing personal injury or death  
• Unpaid TV licence fees 

Debts incurred by fraud can be included in a DRO but they will not be written off when the DRO ends. 

Does a DRO remove a county court judgment (CCJ)? 

If you have a county court judgment (CCJ), it will remain registered on your credit reference file for six years from the date the CCJ was made. 

If the CCJ is for a qualifying debt and is included in your DRO, the creditor will be prevented from taking enforcement action during the 12-month period starting on the date your DRO is approved.  

A CCJ included in a DRO is usually written off after one year. However, if you have a CCJ for a debt that was incurred through fraud, you will still owe the debt after the DRO ends. 

Does a DRO affect Universal Credit? 

A DRO does not affect how much Universal Credit you are entitled to. 

If you currently repay one or more qualifying debts through deductions taken from your Universal Credit, your Universal Credit payments may increase. This is because creditors for debts included in your DRO should stop any action to recover the debt from you.  

It is a good idea to tell the Department for Work and Pensions (DWP) when your DRO starts. You can do this by calling the Universal Credit helpline on 0800 328 5644. 

Does a DRO affect car insurance?

If you are not in arrears with car insurance payments, it is unlikely that your current policy will be affected. However, it is a good idea to check your policy for any clause that could cancel your insurance due to a DRO. 

If you pay for your car insurance in instalments, it is likely that you are paying a loan for your insurance. If you are behind with payments, the debt that is due will need to be included in your DRO. This may result in your policy being cancelled. 

If you intend to take out a new loan for car insurance while you are subject to a DRO, you must let the lender know about the DRO if you will be taking credit of more than £500. As your DRO affects your credit rating, it is possible that the payments on a new insurance policy will be higher as insurers may consider you a higher financial risk. 

Useful contacts

Debt Relief Order Unit Insolvency Service Phone: 0300 678 0015 Email: DRO.Unit@insolvency.gov.uk

Individual Insolvency Register www.insolvencydirect.bis.gov.uk/eiir/

Insolvency Service www.gov.uk/government/organisations/insolvency-service

Parkers Guide www.parkers.co.uk/cars/prices/

Universal Credit helpline Phone: 0800 328 5644 

Other guides that may help you

Breathing space guide

Credit reference agencies guide

Safe bank accounts guide

Time orders on unsecured debt guide

Ways to clear your debt guide