Getting a Debt Relief Order (DRO) – Writing Off Your Debts

Are you struggling with debt? There are options available to help you in this situation and at Center 4 Debt Management we are proud to bring you different Debt Consolidation solutions and Debt Management Plans. A Debt Relief Order (DRO) is an easy debt solution, fast, and leaves you without harassing phone calls. Here is a friendly guide to help you understand what a DRO is, if the option is a good choice for you and whether or not you meet the criteria.

What Is A Debt Relief Order?

A debt relief order is a way out of debt for those who cannot pay what they owe. A debt relief order means you don’t have to pay any money to certain debts for a period of time. The time specified is normally 12 months.

Once the debt relief order has finished, the debts included will then end up discharged. You won’t have to pay them at all. If you have debts that were equal to fraud, they won’t be included. Payments will need to get paid as soon as the DRO has ended.

If your circumstances have changed and you come into some money and pay some of your debts, the DRO can end up revoked.  This means that the money will have to go back to whom you owe money.

How Does A Debt Relief Order (DRO) Work?

Once you get accepted for a DRO, you go into a period of 12 months which get referred to as a moratorium. At this time, you will have restrictions on things that you can do.

A DRO Application Is Successful

You will receive a notification stating your application has been successful, and the following will occur:

  • A notice that states the restrictions and duties that need following while the DRO is in place.
  • A notice will go to the creditors that you owe money to
  • There will be an entry into the electronic individual insolvency register that shows what the DRO has made against the individual. Your name can be left off the EIR if there is a belief that it can lead to violence or put someone in any danger.

Required Payments Will Need ToBe Made

The DRO period means that those to whom you owe money cannot take further action against you. Therefore, you won’t need to make any payments to the creditor except in certain circumstances such as:

  • Payments to the mortgage or landlord for rent that is in arrears. A DRO will not stop banks and landlords from taking you to court. If you are still in the property and don’t want to be evicted, you will need to continue paying any overdue amount and the amount you pay each time for rent.
  • Any payments for bailiffs and those who have taken your belongings and have gone through an agreement cannot be stopped with a DRO. Your belongings can still be sold. If you want to avoid this, the only choice is to keep paying the debt.

Average household expenses will still go on as usual during the DRO timeframe. Bills such as

  • Water fees
  • Electricity and gas
  • Council tax
  • Rent

If you have certain debts that were not included in the DRO, you will still have to keep making those payments.

What You CantDo During A DRO

When you are currently in a DRO, there are a few things that you cannot do. The restrictions are:

  • Gaining credit without telling the credit lender that you are currently in a DRO.
  • Changing the name of a business and still working under it after that business was included in the DRO. You can still do business as long as you use the name which the DRO is under.
  • Promoting, setting up, or managing a limited company. To do so, you need to gain permission from the court.
  • You will also need permission from the court to act as a company director

If you are not following such restrictions or similar fines can get applied, or you can be sent straight to prison. This is committing an offence, and chargers can come into force.

If you are found out to have broken any restrictions or lied on your application, you can suffer consequences such as having restrictions extended.

Is A Debt Relief Order For You?

Is a DRO the right choice for you? A DRO is a good way to get yourself out of painful debt. Although you can be free of debt, a DRO can still make a big impact. Take time to research how it will affect you, such as:

  • If debts were for certain goods that you had on hire purchase, then you will be required to return the goods
  • The DRO will remain on your report for over 6 years. This can make it hard to get a mortgage or even a personal loan
  • Your tenancy agreement may be affected. This can be checked via a DRO advisor
  • Everyday bank accounts can be closed, requiring you to open up new ones
  • If you have a power of attorney for someone,then this will be stopped
  • It can affect citizenship. An immigration specialist can help you with this one

What Is It Covered With A Debt Relief Order?

Debts that are covered by the DRO are known as qualifying debts. These are the debts that you cannot be hassled for or have court action taken against you.

INCLUDEDNOT INCLUDED
Credit cardsStudent loans
LoansMagistrates court fines
overdraftsOther fines relate to criminal activity
Utility billsSocial fund loans
Income taxCompensation for injury and death
Hire purchase 
Buy now pay later 
Solicitors or vets 
Debts to family and friends 
Business debts 

If you are not sure whether the DRO covers certain debts, you can ask the advisor.  Once your DRO has been approved, if you want to add another debt, this cannot be done. It is important that you include all debts in the DRO order. If you have debts that you didn’t include and they would send you over the £30,000 limit, then you run the risk of the order getting cancelled. Write down everything you owe before going any further to ensure nothing gets forgotten.

Costs Of A Debt Relief Order

To obtain a DRO, there is a £90 fee involved, which will be charged by the insolvency service in order to process your application.  You are not entitled to any exemptions or discounts like you are most likely to get with bankruptcy. This is the flat fee that you have to pay in order to go ahead with the DRO. You have the choice of paying this fee in full or in installments. Once the fee gets processed, the application will be submitted, and you cannot get the money back. If the DRO is revoked or rejected, this is a non-refundable fee.

Debt Relief Order Pros And Cons

PROSCONS
The order only lasts a yearRecorded on your credit file
Charges and interest are frozenRecorded on the insolvency register
Debts can be written off12 months of restrictions
The £90 fee is cheaper than other optionsBank accounts can be frozen
No action can be takenYour employment can be affected
You can keep your assetsYou must declare any credit you borrow
No advertisement in the TelegraphCannot have another DRO for 6 years

Do You Qualify For A Debt Relief Order?

There are certain criteria that you need to meet before anything can get approved for a DRO, such as:

  • you must owe less than £30,000
  • you are only left with less than £75 each month after paying tax to spend on normal household expenses
  • you have worked or lived in Wales or England for 3 years
  • you don’t have assets that are worth more than £2,000 in total
  • you haven’t already had a DRO within 6 years
  • you don’t own your own home
  • you don’t have savings, assets, and things worth value

If you are involved in the form of insolency procedures or bankruptcy, then you are not eligible. However, if a creditor requests you to be bankrupt, then you can request permission to opt for a DRO instead.

Suppose you own a vehicle that is less than £2,000; it does not need to get included in the DRO assets. If a vehicle is worth more than that amount, it doesn’t need to be included if you have a disability and the car has been adapted. You are only allowed to exclude 1 vehicle, and you can not exclude it if it’s a car that you only use for work relations.

What Happens When Circumstances Change?

If you happen to undergo any changes while you are in the DRO period, the official receiver needs to be told. Changes such as:

  • Increase in income
  • Any money or valuable that’s been have acquired
  • Wrong information on the application

If you fail to tell the official receiver about any changes that have occurred, then you risk the DRO getting cancelled. This means the debts will need to get handled differently. You can also suffer a debt relief restriction order which can see criminal charges against you.

What Happens AtThe End Of The Order?

When the order has finished, you become free of the debts that were in the DRO. This doesn’t include any debts that were fraudulently obtained. Here we explain what happens when the DRO has finished and what to do to prove the order is over.

The order will go for twelve months from the date that is made by the receiver. You cannot make payments to the loans throughout this time, and you will need to follow the restrictions.

Notification Of The Ending Period

You will not receive anything stating that the DRO has ended. You need to keep track of this yourself. If you have lost track of them, you can check via the insolvency service register. Here is where you will find the ending date for the DRO.

If you need proof that your DRO has ended, you will be able to print off the entry on the register, which will have the DRO period timeframe.

Your DRO entry will remain on the register for 3 months after the time has finished. Once the 3 months are up, your entry will get removed from the register.

The Off Chance The Creditor Does Not Accept The DRO Has Ended

In rare cases, a creditor can still try to collect a debt after the DRO has finished. You can fight this and you won’t have to pay anything. If you are in this situation, ask your DRO advisor how to handle this the correct way. The expectation to do with this is debts with rent or a controlled goods agreement are with the bailiff. In order to keep the goods or stay in the home, you still need to pay.

If you have a creditor that does not accept the DRO has finished, you can print off a copy of your order from the insolvency register. If this occurs after the time frame and there is no entry available to print anymore, contact the creditor and talk to the insolvency register. The team will then confirm the DRO has ended and inform you that no action can then get taken against you.

How Much Effect Does A DRO Have On A Credit Report?

Any DRO remains on the credit file for 6 years from the date you were approved. This can make it hard to obtain any sort of credit in those 6 years.  Creditors prefer to rate people on the most recent history that is on file. Some lenders have the rule not to lend to anyone who has a default on their record no matter how long ago it occurred. When you have a DRO, there is a limit of taking out credit any higher than £500, and the lenders must be made aware you have a DRO. The DRO is on the insolvency record, but not all lenders check this.

Is It Possible To Get A DRO Removed From My File?

No. you cannot get the DRO taken off your credit file. However, ensure you check that once the DRO has ended, the updates affect the registry, and if applying for any finance, double-check your credit file for this first before applying.  It is also good to check that the accounts that were in the DRO are marked as partially or fully settled. If this hasn’t been done, contact the creditors, who can update this for you.

If you took out the DRO due to redundancy or serious illness, this could be changed to notice correction, but you will need to apply for this.

This is basically a statement that consists of around 200 words that go to the creditors with the request to make it available to future creditors. The lenders may consider this when making their decision to lend to you.

What Happens If The Debts Are Higher Than The recorded Amount On My Application?

You must record accurate information regarding your debts on your application. It will only be the debts you record on the application put into the DRO. You need to ensure that when finalizing the amounts, you are using an up-to-date statement. If you are using an old one, there might be interest and charges not being recorded on the application form.

This can mean you get ordered to pay the difference. If you have a debt of 3,400and you record that on the form, and there is a fee of  £25 been added, you will need to pay the £25 yourself. Interest accumulates often, so if there is a big delay from when you sent in the application to when it is finalized, there may be interest charges that you will need to pay to the creditors.

What Happens To Bank Accounts?

If your DRO is successful, then the bank account won’t always be frozen. It remains the decision of the bank to decide whether your bank accounts can stay open or they must be frozen or completely closed. If the debt is with the bank itself, it is quite often normal for the accounts to be frozen until you get approval on your DRO. An account can still be at risk even if you don’t have a debt with your current bank account.  You can call your bank and get further information on this.

You can apply for a new account even when you have a DRO in place, but the bank may reject you.

Has Your DRO Been Rejected?

If you have had a DRO rejected, they will give you some information as to why this occurred. Most times they are common reasons such as:

  • You didn’t provide any information that was needed
  • You don’t meet the criteria
  • There is belief you have not been honest when filling out the application

Do You Suspect The Decision Is Wrong?

If you think the rejection for the DRO was unfair or wrong, you can ask the court to get this changed or reconsidered. However, before you go ahead and request that this gets looked into you should check in with the official receiver and ask them to reconsider. This will allow for a look into the application to see if the first decision was correct.

You can request at any time for the decision to be looked over again, but you must be able to show the following:

  • You meet all the criteria needed
  • You were honest
  • You did send in further information that was needed

How To Request A Decision To Be Reviewed

If you want a reconsidered decision, you need to speak to the DRO advisor who made the application. If there are reliable grounds to challenge their decisions, you can request the DRO advisor to help you write a letter to the official receiver. Your letter needs to state the reasons why you are appealing the decision clearly. Include any evidence that you might have to help support your case.

Decisions Cannot Be Changed

If the application is once again refused, you can send it to the court. You need to allow the receiver to have a chance to reconsider their decision and look over the evidence and letter before you appeal to the court. Your DRO advisor will be the best person to seek advice from as to whether this is the right course of action for the circumstances.

How May A Debt Relief Order Affect You?

There are several ways that a DRO can affect you:

Bank Accounts

It can be harder to open a bank account while you are on a DRO. After the DRO has ended, it can be the same. At the same time, the record stays on your account. Your bank doesn’t get told about the DRO unless they are part of the DRO and you owe them money. Some banks will conduct automatic checks every so often to see if there is any history of DROson their customer’s names. It is then they will decide what happens to your account.

Renting In The Future

If you rent a home, you may not get evicted out of the home due to having a DRO that they are not involved in. You can, however, have trouble getting a DRO when you are applying for a home. A DRO will show up when a landlord or rental company runs their checks against your name. You can be turned down or charged higher fees than others. Some companies will require you to list someone as a guarantor if you cannot pay. If you believe the rules and decisions handed out are unfair, you can get further information on your rights to see where you stand.

Other Debt Solutions To Consider

When the huge burdens of debt don’t let you sleep and make you gaze at the walls all night for solutions for benign debt-free, no problems are solved. We are here to present some of the well-functioned Debt solutions that professional financial advisors also advise. If a DRO is not in the cards for you right now or you would prefer to take another approach, then you can always consider the below. If these tips don’t help, you can always fall back on the DRO if you need help.

Don’t Add New Debts

The first and foremost step to get debt-free is to stop taking new debts. When loans and debts are easily available, it develops a habit of overspending, and this results in piling up your year-old debts. The most important step of being debt-free is to stop using a credit card or only use it when you need it for some emergencies or necessities. Otherwise, the habit of using a credit card is the biggest reason for huge debts.

Similarly, “convenience” cards, such as gas cards, department store cards, etc., are also to be used very little.

Get A Note Of All Your Expenses

Many people might think it is useless to do, but it helps you keep track of all your expenses, credit purchases, and spending patterns. Your debt might not come from huge amounts of loans, but even small credit purchases, interests, and small loans can add up to a vicious circle of debt trouble.

Find Out Your Debt Status

How much money is owed? Who owns it? What are the conditions? Debt can make you feel a lot of pressure because you don’t know how much debt you owe? Collect your bills, make a list or spreadsheet, and record all your debts. Write down all relevant facts, including the name of the creditor, what is the book balance, the minimum monthly payment, and interest.

Prioritize Your Debt And Start Paying It Off

If you have multiple debts, it’s good to prioritize them and use your saved funds very precisely to pay off the debts with higher interest rates first. This is because debts with higher interest rates are continuously adding up more debts and increasing your financial burden.

With time, your debt scope will start shrinking. When you insist on repayment, you will have more disposable income, and your repayment ability will be enhanced. Insist on paying off each debt one by one under the priority level. After you have paid off all debts, credit cards, convenience cards, and high-interest credit cards, limit the use of these credit purchase cards for a while.

FAQ’s

Does It Take Long To Set Up DRO?

The process and set-up for a DRO are fairly fast. Once the assessment has been done and the circumstances have been gone through, the DRO can be applied. The overall process is quite fast. The assessment will is done via a telephone appointment, but if needed, it can be done in person.

How Much Do I Pay A Month?

There are no monthly payments that need to be paid. You will, however, have the one-off fee that goes to the official receiver. This fee is made payable under all circumstances and cannot be changed or refunded. If the circumstances don’t improve for the applicant, there will be no more fees.

How Long Does A DRO Last?

A DRO will last for 12 months. After this period has ended, the creditors must write off the outstanding amount owning. The applicant is then legally classed as debt-free.

Does A DRO Mean No Legal Action Can Be Taken?

The DRO will stop all harassment and recovery being taken against you by all of the creditors listed in the DRO. When it comes to the power of the DRO, the creditors remain weak.

Do I Choose DRO Or a IVA?

If you qualify for an IVA (Individual Voluntary Arrangement), then that means you can’t obtain a DRO. Same vice versa. If you qualify for a DRO, then you won’t qualify for an IVA. You shouldn’t ever need to choose between the two. It is either one or the other that you can apply for. An individual cannot meet the criteria for both.

Will The Creditors Accept The DRO?

Unfortunately for the lender, they don’t have a choice. Getting a DRO is a formal solution to debt, which means that they must accept it and abide by the set rules. The creditors lose the right to fight for their money in court or any other way like contacting you. All debts with those creditors must get written off when the DRO timeframe has finished. You are left debt-free.

Where Does A DRO Stand Legally?

A DRO is an order from the court. The DRO carries the insolvency laws of England, Northern Island, and Wales. Creditors and participants will need to follow the order otherwise, legal action can be taken against them

Do I Need A New Bank Account?

If your bank account has an overdraft or has any credit facilities with the bank providing your bank account, you will need to open a new bank account. This is because the bank can use the right to set off the debts from any balance sitting in your bank account. This could leave you with no money to pay for living costs.

Do I Need A Professional Opinion?

If you are experiencing hardship and unsure what to do in getting out of debt problems, consult a professional. Making the wrong decision can sometimes be harmful. Consulting with a debt specialist will help you make the right decision for your circumstances.

Which Is Best, Bankruptcy Or A DRO?

There is no better choice. The decision is based on which option is best for your circumstances, income, and the amount of debt you have, etc. the DRO is the cheaper option and the least invasive one.