If you’re currently experiencing financial difficulties and are unsure of what steps, you may want to consider a Debt Relief Order. More commonly known as a DRO, a Debt Relief Order is a great alternative to bankruptcy in certain situations – do bear in mind though, there are certain criteria you will need to meet in order to be eligible and a DRO is not a form of debt consolidation. So, what exactly is a DRO, and how do you know if you’re eligible?

What is a Debt Relief Order?

In short, a DRO is a relatively new concept (in the grand scheme of things) that offers a great alternative to bankruptcy. A new form of insolvency measure, they were introduced back in 2007 and you can now apply for one for a flat fee of £90. The main benefit that comes from this form of debt management is that your debts will be frozen for a period of 12 months and if your financial circumstances remain the same at the end of this period, your debts will be written off.

Are You Eligible for a Debt Relief Order?

If you’re unsure whether or not you’re eligible, don’t worry, we can help you with this. Firstly, you will only be able to apply if you are currently unable to pay your debts. This may seem self-explanatory, however it is really important, as you won’t even be considered for a DRO if you have more than £50 left over per month – after you’ve paid all of your usual household expenses. Also, if you own a car that is worth over £1000 then, again, you won’t be eligible. Other reasons that may prevent you from being granted a DRO are:

  • You own your own home
  • You have been bankrupt or had an IVA within the last six years
  • You have savings or assets worth over £1000
  • Your debts are more than £20,000

If you meet the above criteria, then you will be able to apply – if you don’t, you may want to consider other options, such as bankruptcy, debt consolidation, a debt arrangement scheme or IVA debt solutions.

What are the Implications?

You may be thinking that all this sounds too good to be true – but you should be aware, there are some implications that go along with this form of debt help. For example, the DRO will stay on your personal credit report for a period of 6 years, which will severely affect your chances of getting credit during this period and potentially beyond it. In addition to this, you may struggle with things such as opening a new bank account or even fining a new home – as most private landlords will not consider potential tenants with any kid of insolvency of their credit file.

     This being said, it’s really important that you weigh up all the options available to you before applying for a Debt Relief Order, as there may be other debt help solutions that are more tailored to your personal circumstances.

How Do You Apply?

So, you’ve weighed up all your options and have come to the conclusion that a DRO is your best option – so how do you apply? The first thing to consider is that you won’t be able to apply directly – you’ll need to go through a specialist adviser, which you can find at your local citizens’ advice bureau. When you have selected one, they will walk you through the whole process and help you to draw up your application – including things such as working out your monthly incomings and outgoings, as well as accurately valuing your assets.

Also, as mentioned previously, there is a flat fee of £90 that you’ll need to pay in order to apply. Don’t let this put you off though – as this can be paid in installments over a 6-month period – but do bear in mind, it won’t be refunded if you’re application is unsuccessful, which is why it’s really important to make sure you meet all the criteria.

One more vitally important thing to remember is that if your circumstances change during your DRO, you MUST inform the official receiver. For example, your income may increase, or you may receive additional money or valuables in a will. Failure to inform the official receiver could lead to your DRO being revoked, or you may even be hit with a hefty fine! So it’s vitally important that you remember all of the above when applying.

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