Sometimes, a person can get into debt and find that they’re struggling to pay back the money that is owed to others. This can cause a huge amount of stress and panic for a person and make the situation even worse. Ranging from the overuse of a credit card, a loan, purchasing from catalogues etc. it is incredibly common for people to be in this situation. If this happens though there is a strong solution known as a Debt Relief Order (DRO) which helps people who fall under this statement.
What is a Debt Relief Order (DRO)?
A DRO is a way of having the existing debts a person may have to their name being written off if they can’t afford it. For those who don’t have many assets and their levels of debt are low, this solution is primarily targeted at them. It’s a great alternative to claiming bankruptcy as it’s a lot cheaper to do and can allow you to still feel in control of your finances.
How Do You Apply for a Debt Relief Order?
Firstly, there is a few conditions which must be met to make you eligible to apply for one. These are:
- You need to have less than £1000 in assets (If you own a car, it’s value must be worth less than £1000).
- You must live in the UK (Excluding Scotland).
- You cannot have more than £50 in surplus income each month.
- You cannot apply if you own a home.
- If you look at those conditions and believe that you apply to each of them (remember, you must meet all those conditions), then you are on your way to applying for a DRO.
- The next thing you should do is start to fill in the DRO application form. This form will require a lot of personal information, so it can be stressful to fill out, but you will be supported throughout the application process by us.
- Finally, you’ll have to pay £90 fee. Again, this is a lot cheaper than claiming bankruptcy and is only a one-off payment. Once this fee has been paid in full, then your DRO application will be submitted straight away.
How Long Does It take to set up a DRO?
Not that long. The application can be completed in a day and once it is set up, it will take an official receiver between 24-48 hours to process the application. Once this has happened, it will take up to 10 days for the letter to arrive or it can be sent through email even quicker.
What Can be Included in a Debt Relief Order?
Things that you can include on your DRO are:
- Benefits overpayments
- Credit cards
- Rent, utility bills, telephone bills, council tax and income tax that is owed
- Buy now – pay later agreements
- Hire purchase or conditional sale agreements
- Business debts
- Apply for £500 or more of credit without informing the lender about the order.
- Continue to run and operate a business using a different name to the one stated on the order.
- Act as the director of a company without gaining permission from the court.
- Be involved with setting up, managing and/or promoting a limited company without permission from the court.
- Add new debts or debts you forgot about once the agreement is made.
- After 12 months, all debts that are contained on the order will be written off
- You don’t have to go to court to sort it out
- You’re protected from enforcement action by your creditors
- Tight restrictions are placed on income, assets and debts for those who apply DRO.
- If circumstances change, you may still be required to repay your creditors.
- Your DRO will be on your credit file for 6 years. This could affect your chances to get credit in the future.
- You can't promote, manage, set up or act as a director for a limited company, without permission from court.
How Long is a DRO?
Once your application is submitted, it will take 12 months to process. This period is referred to as the moratorium. During this period, you are restricted a bit financially whilst your DRO is being processed. You can’t:
Will a Debt Relief Order Affect my Credit Rating?
The DRO will show up on your credit reference file. With this, it can reduce the chances of getting credit from some lenders as it tells them that you have struggled in the past to pay debts off.
It will make it harder for you to open new bank accounts, apply for loans, purchase a home and get a mortgage. So be prepared to face some challenges like this if you do decide to apply for a DRO.
How Long Does a DRO Stay on Your Credit File?
A DRO will stay on your credit reference file for up to 6 years after the date it was made. This means any potential creditors will be able to see details of the order before they consider giving you credit and it may affect your chances. It’s important to be aware of this before undertaking the agreement.
What Happens at the End of a DRO?
When the end of your agreement is met, you are officially free from the debts that are listed in it (apart from any which were obtained through fraud).
You don’t receive any official notice or communication to tell you that the DRO period has ended so it is up to you to remember the date. Make sure to keep all the documents and information safe so you can refer back to them when needed.
What are the Advantages?
Advantages of a DRO include:
What are the Disadvantages?
Disadvantages of a DRO include:
If you feel that this solution would be the right one for you, get in touch with our team straight away and we’ll give you some more information on how to begin the process. Struggling with money can make life stressful, but our advisors are here to make everything as simple as possible for you.