5 Things you should know about Debt Relief Orders in the UK

5 Things you should know about Debt Relief Orders in the UK

A debt relief order is a solution provided to those with debts of less than £20,000. Such a debt is something that a person is unable to pay and they do not have any assets to sell to pay off the debt. The person to benefit from DRO must be a resident of Northern Ireland, Wales or England. In essence, this is a cheaper alternative to bankruptcy. Those in Scotland need to apply for a Minimal Asset Process – MAP.

When you get a DRO, you are not required to pay the debts for one year. If your circumstance remains the same by then, the debts are written off.

Here are things you should know about Debt Relief Order UK.

  1. You must meet requirements

Not everyone is qualified for a DRO. You must meet requirements such as your debt must not be more than £ 20,000, you are not able to pay the debt, you are not a homeowner, you only remain with £50 or lower every month after deducting your household expenses, your assets are valued at less than £1,000, your car’s value is £ 1,000 or less and you haven’t had a DRO for the last 6 years. You should also not have an individual voluntary arrangement (IVA) or going through bankruptcy.

  1. Not all debts are covered

The DRO mainly covers unsecured debts including payday loans, credit cards debts and overdrafts. Others include arrears in telephone bills, utility bills, income tax, council tax and rent arrears.

It also covers hire purchase agreements, business debts, benefits over payments, and loans from family and friends.

You should continue paying for the debts that are not covered. These include student loans, child support, injury or death compensation, court fines and social funds loans.

  1. You must work with DRO adviser

You cannot apply for a DRO on your own. You must apply via an authorized DRO adviser who assesses your eligibility and helps you to complete the paperwork. The adviser applies for the DRO on your behalf to the Official Receiver at the Insolvency Service.

Remember that you need to pay a DRO fee of £90 directly to the Insolvency Service.

  1. The DRO has repercussions

While it may save you from paying a particular debt, the DRO has negative repercussions. It affects your credit rating and it remains for six years in your credit record. In case you include hire purchase as one of the credits to be covered, you are required to return the goods.

In the DRO year, you must inform the lender about the DRO if you want to borrow more than £500, you can’t start a limited company without court’s permission, and your details will be on the insolvency register including the 3 months after DRO and will be available to the public.

In case your circumstances change, you will continue repaying the debt.

  1. No need to appear in court

In as much as a DRO is formal, you are not required to appear in court. You just need to make your application to the Insolvency Service via a debts advisor. The application is received by an Official Receiver at the Insolvency Service. The receiver is a bankruptcy court authorized officer who is also a civil servant.

If you are eligible, the bankruptcy court accepts your application. The DRO provides a less expensive way of dealing with debt that you are unable to pay.

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