Applying for a Debt Relief Order (DRO) can be a crucial step towards financial stability for many individuals in the UK. In 2024, the process has become more streamlined and accessible than ever before, allowing applicants to navigate their way out of debt with greater ease.
Don’t worry. Look no further. This step-by-step guide will walk you through the online application process, ensuring you have all the information you need to apply successfully.
So, without further ado, let’s read on and learn how you can take control of your finances and pave the way to a debt-free future.
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Can I Apply for a DRO Online Myself?
No, you cannot apply for a Debt Relief Order (DRO) online by yourself. You must go through an approved intermediary, such as a debt adviser from a registered debt advice organisation, who will assess your eligibility and submit the application online on your behalf.
How Can I Apply for a Debt Relief Order?
Applying for a Debt Relief Order (DRO) in the UK is a structured process designed to help individuals with low income and minimal assets manage and eventually eliminate their debts.
Here’s a step-by-step guide to applying for a DRO online in 2024:
Before applying, ensure you meet the eligibility criteria:
- You owe less than £30,000.
- You have less than £75 a month in disposable income.
- Your assets are valued at less than £2,000.
- You have lived or worked in England or Wales in the last three years.
- You haven’t had a DRO in the last six years.
Collect all relevant information about your debts, income, and assets. You will need details such as:
- The amount you owe and to whom.
- Your monthly income and expenses.
- A list of your assets and their approximate values.
You cannot apply for a DRO directly; you must go through an approved intermediary, such as a debt adviser from a charity like StepChange or Citizens Advice. Contact one of these organisations to schedule an appointment.
With the help of your intermediary, fill out the DRO application form. Your adviser will ensure all information is accurate and complete.
In the past, there was a £90 fee for applying for a DRO. But From 06 April 2024, you do not need to pay for a DRO – there’s no application fee. [Source: GOV.UK ]
Your intermediary will submit the application on your behalf to the Insolvency Service, the government agency that processes DROs. He will submit the Debt Relief Order (DRO) application online on your behalf.
Once submitted, the Insolvency Service will review your application. This process can take a few weeks. If approved, your DRO will be put in place, and your debts will be frozen for 12 months.
During the 12-month DRO period, you must adhere to certain restrictions, such as not obtaining additional credit over £500 without informing the lender of your DRO.
After 12 months, if your circumstances haven’t changed, your qualifying debts will be written off, and you will no longer be liable for them.
By following these steps and utilising the available resources, you can effectively navigate the DRO application process and take a significant step toward achieving financial freedom.
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Why Do I Need a Debt Advisor for a DRO?
You need a debt advisor for a Debt Relief Order (DRO) because the application process requires expert guidance and an official submission through an approved intermediary.
Here are the key reasons:
A debt advisor will accurately assess your eligibility for a DRO based on your financial situation. They ensure that you meet all the necessary criteria, such as debt limits, income thresholds, and asset values.
Debt advisors help you gather and accurately document all required information about your debts, income, expenses, and assets. They ensure that your application is complete and accurate, reducing the risk of errors that could delay the process.
Advisors provide professional advice tailored to your specific circumstances. They can explain the implications of a DRO, help you understand your options, and advise on the best course of action for your financial situation.
Only approved intermediaries can submit a DRO application to the Insolvency Service. Debt advisors are registered and authorised to handle this process, ensuring your application is submitted correctly and efficiently.
Throughout the DRO process, a debt advisor offers support and guidance. They help you navigate any challenges, ensure you adhere to the conditions of the DRO, and provide assistance if your circumstances change.
Debt advisors often have access to additional resources and support networks that can help you manage your finances, budget effectively, and work towards long-term financial stability.
Debt advisors have the necessary legal and financial expertise to manage the complexities of a DRO. They stay updated with current regulations and ensure your application complies with all legal requirements.
Working with a debt advisor ensures that your DRO application is handled professionally and increases the likelihood of a successful outcome, helping you achieve relief from your debts effectively and efficiently.
What Proof Do I Need Submit for a Debt Relief Order?
To apply for a Debt Relief Order (DRO), you will need to provide detailed proof of your financial situation to ensure that you meet the eligibility criteria.
Here’s a list of the types of proof and documentation you will typically need:
- Credit Statements and Bills: Recent statements from all your creditors showing the amount owed.
- Loan Agreements: Copies of loan agreements or contracts.
- Overdue Notices: Any overdue payment notices or debt collection letters.
- Pay Slips: Recent pay slips (usually the last three months) if you are employed.
- Benefits Statements: Statements or letters from any benefits you receive, such as Universal Credit, Jobseeker’s Allowance, or disability benefits.
- Pension Statements: If you receive a pension, provide recent pension statements.
- Self-Employment Records: If you are self-employed, provide recent accounts or tax returns.
- Bank Statements: Recent bank statements (usually the last three months) showing regular expenditures.
- Utility Bills: Recent utility bills (electricity, gas, water) showing your regular household expenses.
- Rent or Mortgage Statements: Proof of your monthly rent or mortgage payments.
- Council Tax Bills: Recent council tax bills.
- Other Bills: Any other regular expenses such as childcare, insurance, or medical costs.
- Vehicle Documents: Registration documents and valuation for any vehicles you own.
- Property Valuations: If you own property, provide recent valuations or mortgage statements.
- Savings and Investments: Statements for any savings accounts, ISAs, or other investments.
- Household Goods Valuation: An approximate valuation of significant household items like furniture and electronics.
- ID Proof: Passport, driver’s license, or birth certificate to prove your identity.
- Proof of Residency: Utility bills, bank statements, or official letters showing your current address.
- Court Orders: Any court orders related to your debts.
- Previous Debt Solutions: Documents related to any previous debt solutions you’ve undertaken, such as IVAs or bankruptcy.
Gathering and organising these documents will help your approved intermediary assess your eligibility for a DRO and prepare your application accurately. Furthermore, providing complete and accurate information will facilitate a smoother application process and increase the likelihood of a successful outcome.
How Much Does DRO Cost?
As of 6 April 2024, applying for a Debt Relief Order (DRO) no longer requires an application fee. Previously, applicants had to pay a £90 fee to process their application. This change aims to make debt relief more accessible to those in need.
Now, you can apply for a DRO without worrying about the upfront cost, making it easier to take the first step toward financial stability.
Consequences of a DRO
A Debt Relief Order (DRO) can provide significant relief from debt, but it also comes with certain consequences and restrictions. Here are the key consequences to consider:
A DRO will remain on your credit file for six years from the date it is approved. This can significantly affect your credit rating, making it more difficult to obtain credit during this period and possibly beyond.
For the 12 months that the DRO is in effect, you will be subject to certain restrictions, including:
- Borrowing Restrictions: You cannot borrow more than £500 without informing the lender of your DRO.
- Business Restrictions: You cannot act as a company director or be involved in the management of a company without court permission.
- Professional Restrictions: Some professions and roles may have specific restrictions for individuals with a DRO, affecting your employment opportunities in certain fields.
Your DRO will be recorded on the Individual Insolvency Register, which is accessible to the public. This can affect your reputation and professional standing.
During the DRO period:
- Asset Limits: You must not acquire new assets exceeding £2,000 in total value.
- Income Changes: Significant increases in your income or receiving a lump sum (such as an inheritance) must be reported to the Official Receiver, which could affect the status of your DRO.
You must comply with the conditions set out in the DRO, such as cooperating with the Official Receiver and providing necessary financial information. Failing to comply with these conditions can result in the DRO being revoked.
At the end of the 12-month period, if your circumstances have not improved, your qualifying debts will be written off, and you will no longer be liable for them. This discharge can provide significant financial relief, allowing you to make a fresh start.
Some debts are not covered by a DRO and will remain your responsibility. These typically include:
- Court Fines and Criminal Penalties: Any fines or penalties from a court.
- Student Loans: Debts related to student loans.
- Child Support and Maintenance: Payments for child support or maintenance.
- Certain Types of Benefits Overpayments: Overpayments that are being recovered by deductions from your benefits.
A DRO provides significant relief from debt, but it is not without its drawbacks. Therefore, it’s crucial to understand the long-term impact on your credit rating and financial situation due to applying for a DRO. Additionally, a simple discussion with your debt advisor can help you weigh the pros and cons.
Why Did My Debt Relief Order Get Rejected?
Several reasons could lead to the rejection of a Debt Relief Order (DRO). Here are some common factors that may result in a DRO application being declined:
Your application may be rejected if you do not meet the eligibility criteria for a DRO. Common reasons for ineligibility include:
- Owning assets exceeding £2,000 in total value.
- Owing more than £30,000 in qualifying debts.
- Having surplus income exceeding £75 per month after deducting reasonable living expenses.
Providing inaccurate or incomplete information on your DRO application can lead to rejection. It’s crucial to ensure that all details, including debt amounts, income, expenses, and asset values, are accurately reported.
Failure to disclose relevant information, such as additional sources of income, assets, or ongoing legal proceedings, can result in a DRO application being rejected. Full transparency is essential to the application process.
Engaging in certain financial transactions shortly before applying for a DRO may lead to rejection. For example, transferring assets to others, repaying one creditor preferentially over others, or incurring significant new debt shortly before applying may raise concerns.
If you have previously entered into certain types of insolvency arrangements, such as bankruptcy or an Individual Voluntary Arrangement (IVA), within the past six years, you may be ineligible for a DRO. Additionally, if you have had a DRO in the last six years, you cannot apply for another one.
In some cases, the Official Receiver may exercise discretion in deciding whether to approve a DRO application. Factors such as the nature of your debts, your financial conduct, or other relevant circumstances may influence their decision.
External factors, such as changes in legislation or policy, may also affect the outcome of your DRO application. It’s essential to stay informed about any updates or changes that may impact the eligibility criteria or application process.
If your DRO application is rejected, you will receive written reasons for the decision. You may have the opportunity to address any issues or appeal the decision, depending on the circumstances. Consulting with a debt adviser can provide guidance on your options and help you navigate the process effectively.
What are Your Other Alternative Debt Solutions Available in the UK if DRO is not Workable For You?
Sometimes, you may face difficulties in agreeing to the proposed payment plans from your creditor or the Debt Collection Agency, especially if they are financially burdensome.
In such situations, it is advisable to explore alternative debt solutions that can effectively address your debt-related concerns. In the UK, there are various alternative debt solutions to consider.
However, it’s crucial to keep in mind that each of these debt solutions has specific eligibility criteria. Selecting the right one can lead to debt resolution, while choosing the wrong one could worsen your financial circumstances.
Hence, seeking guidance from a professional debt advisor is a prudent step to take if you find it challenging to determine the most suitable debt solution on your own.
- Debt Management Plan (DMP): An informal arrangement allowing you to make monthly payments toward your debts without a binding commitment.
- Individual Voluntary Arrangement (IVA): A formal agreement with creditors where regular payments are made, and the remaining debt is typically written off after 5 or 6 years.
- Bankruptcy: An option to consider when you have no feasible means to repay your debts. It offers a fresh start but comes with significant implications.
If you need personalised assistance based on your current financial situation, please feel free to complete our online form by clicking here to receive help from our Money Advisor Team.
Seek Free Financial Advice
There are a number of debt charity organisations that you could use to get professional debt and financial advice free of charge. Their advisors will inquire deeply about your debt issue and will help you in finding a reliable solution to overcome it.
Below is a list of charity debt organisations where you could get free debt help:
Final Thoughts
Applying for a Debt Relief Order (DRO) can be a big step towards getting your finances back on track. This guide has shown that in 2024, the process has become easier and more accessible, especially with the removal of the application fee.
However, it’s important to remember that a DRO isn’t a cure-all solution. While it can help with debt relief, it also comes with some restrictions and consequences, like its impact on your credit rating. If your DRO application is rejected, it’s crucial to understand why and explore other options.
Ultimately, with the right information and support, you can navigate the DRO process and work towards a debt-free future.
Key Points
- Applying for a Debt Relief Order (DRO) in the UK involves a structured process facilitated by an approved intermediary.
- To qualify for a DRO, you must meet specific criteria, including limits on debt amount, disposable income, and asset value.
- Before applying, gather all necessary information about your debts, income, and assets to ensure a smooth application process.
- As of April 6, 2024, there is no longer an application fee for DROs, making debt relief more accessible.
- Your approved intermediary will submit the DRO application on your behalf to the Insolvency Service, which oversees the process.
- Once submitted, the Insolvency Service will review your application, which typically takes a few weeks.
- During the 12-month DRO period, you must adhere to certain restrictions, such as limitations on borrowing and business activities.
- While a DRO offers relief from debt, it can also impact your credit rating and impose restrictions on your financial conduct.
- If a DRO isn’t feasible or your application is rejected, explore alternative debt solutions such as debt management plans or individual voluntary arrangements.
- Don’t hesitate to seek guidance from debt advisors or debt charity organisations for personalised assistance and free financial advice.
FAQs
The maximum debt allowed for a DRO is £30,000. This includes all types of unsecured debts such as credit cards, loans, and overdrafts.
Yes, joint debts can be included in a DRO. However, the other party will still be liable for the full amount of the debt.
During a DRO, your bank account may be frozen or restricted. It’s essential to discuss this with your debt advisor to understand how your specific account might be affected.
Obtaining a mortgage after a DRO can be challenging due to the impact on your credit rating. Lenders may be hesitant to approve a mortgage for several years after the DRO.
No, not all debts can be included in a DRO. Exclusions include secured debts, student loans, and fines for criminal offences. Make sure to review which debts are eligible with your debt advisor.
