Debt Relief Orders
Debt Relief Orders (DROs) were introduced on 6 April 2009 as a remedy for debtors whose debts total less than £15,000 and who have little or no disposable income and assets.
Unlike other formal remedies for debt relief such as bankruptcy, DROs are delivered in partnerhip with money advisers, mainly from the free money advice sector. Advisers act as ‘intermediaries’ and assist debtors in making an online application for a DRO to the Insolvency Service. DROs are therefore not available through the court system. The orders are made instead by an Official Receiver, and a special unit has been set up for this purpose at the Official Receiver’s Office in Plymouth.
Once an order has been made creditors who are included in the DRO are prevented from taking any action to recover or enforce their debts against the debtor. In most cases, the debtor will be discharged from liability for those debts at the end of one year.
The Official Receiver will not routinely investigate the affairs of debtors subject to a DRO. However, the Official Receiver has significant powers of of enquiry and enforcement (ranging from revocation of the DRO to criminal and civil sanctions). This may be relevant where, e.g. creditors inform the Official Receiver of substantial assets or liabilities not disclosed in the DRO application, but equally investigation may be random and arbitrary.
DROs are intended to provide a cheaper and simpler method for people to seek relief from their debts. However, they are not an easy option. Debtors will still be subject to the same restrictions as bankrupts and will only be able to access a DRO once every six years. They will also affect the debtor’s credit rating.
Eligibility for a DRO
A debtor must satisfy strict qualifying conditions in order to be eligible for a DRO, including full disclosure of income and expenditure. The debtor’s liabilities must not exceed £20,000, their gross assets must be less than £1,000 and they must have a disposable income of less than £50 per month. Applicants will be allowed to have a vehicle with a value of less than £1,000. The Official Receiver will carry out checks to verify the information provided.
The fee for a DRO is £90.00. This covers the cost of the Official Receiver’s work in administering the application and making the order and has been set to cover the actual cost of the work involved. There is no remission of the fee. The DRO application can only be finally submitted when full payment of the fee has been received by the Insolvency Service.
Further information on DROs, including FAQs and a link to the primary and draft secondary legislation is available on the Insolvency Service website. The latest version of the Insolvency Service’s Intermediary Guidance Notes can be found at the bottom of this page.
AdviceUK has been designated by the Secretary of State as a Competent Authority under Regulation 3 of The Debt Relief Orders (Designation of Competent Authorities) Regulations 2009. This means that advisers working for members of the AdviceUK network can apply to AdviceUK to become an Approved Intermediary under the scheme. As a Competent Authority AdviceUK has the power to approve or decline applications and to continue to assess the suitability of applicants as intermediaries under the scheme.