In 2009 the UK and Wales introduced a new form of debt reduction to take the place of bankruptcy. It was called Debt Relief Order(DRO) and it has been in effect for over seventeen years. What is a Debt Relief Order? A DRO is a quicker, simpler and more cost-effective means as an alternative to bankruptcy for those living in the United Kingdom.
Here are three things you should know about DRO before you apply.
What qualifies you for DRO?
You’re qualified to apply for a DRO if you don’t own your own home, your spare income is nonexistent, and you have less than £20,000 in debt. You also must not have previously applied and been approved for a DRO in the last six years. Finally, you must not be in bankruptcy proceedings in any way.
If you’re not sure if you are qualified you can find help at most Citizens Advice Bureaux.
They can assess your situation and help you determine if a DRO is right for you.
What to expect from the process
Debt Relief Orders can only be completed by someone or a company who has been approved as an intermediary or competent authority. These are mainly experienced debt advisors who are part of debt advice organizations like Step Change, Debt Charity or AdviceUK. They are able to review your information, make a decision if you are eligible and file the DRO application online. There is no fee for using these services.
Once the Insolvency Service has received your application and payment of submission fee, an official will make the order without involving the court, if there are no red flags to slow down the process. Understand that if your reviewer becomes aware of information disqualifying you, the application will be refused. If the information is found out after the application has been approved, it will be immediately revoked leaving you open to any punitive action taken by your debtors.
What the DRO does
Most DRO’s are approved for one year’s time and during that time you will be protected from the following:
- Any action from your debtors to try to collect on your debt.
- At the end of the year, you are freed from all debts in the DRO.
- You are required to communicate and co-operate with your official receiver during the whole year.
- If your circumstances improve, you are expected to make arrangements with your debtors to begin paying back your debt.
What can get you kicked out of the Program?
Here are a few things that will get you kicked out of the DRO program:
- Failure to keep accurate records of any loss of property that occurred two years prior to submitting your application.
- If you’re a business, you fail to supply goods or services that were paid for in full.
- Knowing you were applying for a DRO and incurring debt with the knowledge that you wouldn’t pay it back.
- Committing fraud or fraudulent breach of trust.
These are just a few examples of things that could get you kicked out of the DRO program. You can find a full list at Citizen’s Advice.