A simple guide to applying for a Debt Relief Order

A debt relief order (DRO) is a formal agreement that can help people in England and Wales who are struggling with problem debts. A DRO stops creditors from taking further action to recover their debts and can also write off some or all of the debts. To be eligible for a DRO, you must meet certain criteria, such as having less than 20,000 of unsecured debts, no more than 1,000 of assets, and a monthly income of less than 1,850.

DROs can be a helpful way to get out of debt, but they can also have some negative consequences. For example, a DRO will stay on your credit file for six years, which can make it difficult to get credit in the future. You will also not be able to apply for a DRO again for at least six years.

If you are considering applying for a DRO, it is important to weigh up the pros and cons carefully. You should also seek advice from a debt advisor or other professional to make sure that a DRO is the right option for you.

1. Eligibility

The eligibility criteria for a DRO are designed to ensure that only those who are genuinely struggling with debt can access this form of relief. The income and asset limits are set to exclude those who could reasonably afford to repay their debts. The unsecured debt limit is set to ensure that DROs are not used to write off large amounts of secured debt, such as mortgages or car loans.

Meeting the eligibility criteria is essential for a successful DRO application. If you do not meet the criteria, your application will be rejected. It is important to carefully check your income, assets, and debts before applying to make sure that you are eligible.

If you are struggling with debt and you meet the eligibility criteria for a DRO, it is important to seek advice from a debt advisor or other professional to discuss your options.

2. Application

The application process for a DRO is relatively straightforward, but it is important to understand what information you will need to provide. This information will be used to assess your eligibility for a DRO and to determine the terms of your order.

• Income: You will need to provide details of your income, including your salary, wages, benefits, and any other sources of income.
• Debts: You will need to provide a list of all of your debts, including the name of each creditor, the amount of debt, and the interest rate.
• Assets: You will need to provide a list of all of your assets, including your home, car, savings, and investments.

It is important to be honest and accurate when providing this information. If you do not provide all of the required information, your application may be rejected. You can get help completing your application from a debt advisor or other professional.

3. Fees

The fees associated with applying for a DRO are an important consideration for anyone considering this option. The initial 90 fee can be a barrier for some people, especially those who are already struggling financially. However, it is important to remember that a DRO can provide significant benefits in the long run, such as writing off debts and stopping creditor action.

The monthly fee of 18.50 is also an important factor to consider. This fee is payable for three years, which can add up to a significant amount of money. However, it is important to remember that this fee is used to cover the costs of administering the DRO. It is also worth noting that the monthly fee is less than the minimum monthly payment that would be required on most debts.

Overall, the fees associated with applying for a DRO are an important consideration. However, it is important to weigh these fees against the potential benefits of a DRO. For many people, a DRO can be a helpful way to get out of debt and rebuild their financial future.

4. Consequences

Applying for a DRO can have several long-term consequences that are important to consider before making a decision. One of the most significant consequences is that a DRO will stay on your credit file for six years. This can make it difficult to get credit in the future, as lenders will be able to see that you have had a DRO. This can affect your ability to get a mortgage, loan, or credit card.

• Facet 1: Difficulty obtaining credit
  A DRO will make it difficult to obtain credit in the future, as lenders will be able to see that you have had a DRO. This can affect your ability to get a mortgage, loan, or credit card. It is important to weigh up the pros and cons of applying for a DRO before making a decision, as it can have a significant impact on your financial future.
• Facet 2: Impact on credit score
  A DRO will also have a negative impact on your credit score. This is because a DRO is seen as a form of bankruptcy. As a result, your credit score will be lower, which can make it more difficult to get credit in the future.
• Facet 3: Inability to apply for another DRO
  Once you have had a DRO, you will not be able to apply for another one for at least six years. This means that if you experience financial difficulties again in the future, you will not be able to use a DRO to get out of debt.
• Facet 4: Alternatives to DROs
  There are other options available to people who are struggling with debt, such as debt management plans and individual voluntary arrangements. It is important to speak to a debt advisor to find the best solution for your individual circumstances.

It is important to weigh up the pros and cons of applying for a DRO before making a decision. If you are considering applying for a DRO, it is important to seek advice from a debt advisor or other professional to discuss your options.

5. Alternatives

There are a number of alternatives to applying for a debt relief order (DRO), each with its own advantages and disadvantages. It is important to speak to a debt advisor to find the best solution for your individual circumstances.

Debt management plans (DMPs) are informal agreements between you and your creditors. They allow you to make reduced monthly payments on your debts over a period of time, usually three to five years. DMPs can be a good option if you have a regular income and you are able to make the monthly payments. However, DMPs can have a negative impact on your credit score and they can also make it difficult to get credit in the future.

Individual voluntary arrangements (IVAs) are formal agreements between you and your creditors. They allow you to make reduced monthly payments on your debts over a period of time, usually five to six years. IVAs are legally binding and they will affect your credit score. However, IVAs can be a good option if you have a lot of debt and you are unable to make the monthly payments on your debts.

It is important to weigh up the pros and cons of each option before making a decision. If you are considering applying for a DRO, it is important to seek advice from a debt advisor or other professional to discuss your options.

Case Study

Sarah is a single mother with two young children. She has been struggling with debt for several years and she is now unable to make the monthly payments on her debts. Sarah spoke to a debt advisor and she decided to apply for a DMP. The DMP allowed Sarah to make reduced monthly payments on her debts over a period of three years. Sarah was able to make the monthly payments and she was able to get out of debt. The DMP had a negative impact on Sarah’s credit score, but she was able to rebuild her credit score over time.

Conclusion

There are a number of alternatives to applying for a DRO. It is important to speak to a debt advisor to find the best solution for your individual circumstances.

FAQs about Applying for a Debt Relief Order

A debt relief order (DRO) can be a helpful way to get out of debt, but it is important to understand the process and the potential consequences before applying. Here are six frequently asked questions about DROs:

Question 1: Who is eligible for a DRO?

Answer: To be eligible for a DRO, you must meet certain criteria, such as having less than 20,000 of unsecured debts, no more than 1,000 of assets, and a monthly income of less than 1,850.

Question 2: How do I apply for a DRO?

Answer: You can apply for a DRO online or through a debt advisor. The application process is relatively straightforward, but you will need to provide detailed information about your income, debts, and assets.

Question 3: How much does it cost to apply for a DRO?

Answer: There is a 90 fee to apply for a DRO. If your application is successful, you will also need to pay a monthly fee of 18.50 for three years.

Question 4: What are the consequences of applying for a DRO?

Answer: A DRO will stay on your credit file for six years, which can make it difficult to get credit in the future. You will also not be able to apply for a DRO again for at least six years.

Question 5: Are there any alternatives to a DRO?

Answer: Yes, there are other options available to people who are struggling with debt, such as debt management plans and individual voluntary arrangements. It is important to speak to a debt advisor to find the best solution for your individual circumstances.

Question 6: How long does it take to get a DRO?

Answer: The time it takes to get a DRO can vary depending on your individual circumstances. However, the process can take several months.

Summary of key takeaways:

• DROs can be a helpful way to get out of debt, but it is important to understand the eligibility criteria and the potential consequences before applying.
• The application process is relatively straightforward, but it is important to provide accurate and complete information.
• There are fees associated with applying for a DRO, and a DRO will stay on your credit file for six years.
• There are other options available to people who are struggling with debt, so it is important to speak to a debt advisor to find the best solution for your individual circumstances.

Transition to the next article section:

If you are considering applying for a DRO, it is important to seek advice from a debt advisor or other professional to discuss your options and make sure that a DRO is the right solution for you.

Tips on How to Apply for a Debt Relief Order

Applying for a debt relief order (DRO) can be a complex and daunting process. However, by following these tips, you can increase your chances of success and minimize the potential negative consequences.

Tip 1: Check your eligibility

Before you apply for a DRO, it is important to check that you meet the eligibility criteria. To be eligible, you must have less than 20,000 of unsecured debts, no more than 1,000 of assets, and a monthly income of less than 1,850.

Tip 2: Gather your documents

When you apply for a DRO, you will need to provide a number of documents, including proof of your income, debts, and assets. It is important to gather all of these documents together before you start the application process.

Tip 3: Get advice from a debt advisor

A debt advisor can provide you with free and impartial advice on your options for dealing with debt. They can also help you to complete the DRO application form and ensure that you have provided all of the necessary information.

Tip 4: Be honest and accurate

It is important to be honest and accurate when completing the DRO application form. If you provide false or misleading information, your application may be rejected.

Tip 5: Submit your application promptly

Once you have completed the DRO application form, you should submit it to the Insolvency Service as soon as possible. This will ensure that your application is processed quickly and efficiently.

Summary of key takeaways:

• Check your eligibility before applying for a DRO.
• Gather all of the necessary documents before starting the application process.
• Get advice from a debt advisor if you are unsure about anything.
• Be honest and accurate when completing the application form.
• Submit your application promptly to the Insolvency Service.

Transition to the article’s conclusion:

By following these tips, you can increase your chances of success when applying for a DRO. However, it is important to remember that a DRO is a serious financial decision and it is important to weigh up the pros and cons carefully before making a decision.

Final Remarks on Applying for a Debt Relief Order

Applying for a debt relief order (DRO) can be a complex and challenging process, but it can also be a lifeline for those who are struggling with unmanageable debt. By understanding the eligibility criteria, gathering the necessary documentation, and following the application process carefully, you can increase your chances of success.

It is important to remember that a DRO is a serious financial decision and it is important to weigh up the pros and cons carefully before making a decision. If you are considering applying for a DRO, it is important to seek advice from a debt advisor or other professional to discuss your options and make sure that a DRO is the right solution for you.