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Debt relief orders
Table of contents
- What is a debt relief order
- Who can apply for a debt relief order
- What type of debts can be included in a debt relief order
- How to apply for a debt relief order
- Things you must not do before you apply for a debt relief order or during the debt relief order
- What happens during the debt relief order period
- Things you can't do when you've got a debt relief order
- Changes in your circumstances
- What happens after the debt relief order finishes
A debt relief order is an order you can apply for if you can't afford to pay off your debts. It's granted by the Insolvency Service and is a cheaper option than going bankrupt.
You must have debts of less than £15,000 and a low income.
A debt relief order usually lasts for a year and during that time, none of the people you owe money to (your creditors) will be able to take action against you to get their money back. At the end of the year, you'll be free of all the debts listed in the order.
You can't apply for a debt relief order if you:
- own things of value or have savings of over £300
- own a vehicle worth more than £1,000.
To apply for a DRO, you'll need to contact an authorised adviser who checks whether you meet the conditions and then applies for the order on your behalf. The order will cost you £90 but you can pay this in instalments over six months.
You may have other options for dealing with your debts besides applying for a debt relief order. For more information about these options, see Help with debt.
On the following pages, we will explain in more detail:
- what a debt relief order is
- who can apply for a debt relief order, including the conditions you need to meet
- who can't apply for a debt relief order
- what type of debts can be included in a debt relief order and which can't
- how to apply for a debt relief order
- what happens during a debt relief order, including what to do about your creditors
- things you should do during a debt relief order and things you won't be able to do
- what happens after a debt relief order finishes, including what happens to your debts.
You can only apply for a debt relief order if you meet certain conditions. These are when:
- you have qualifying debts of £15,000 or less. These debts must be of a certain type
- you have spare available income of £50 or less a month after paying your normal household expenses
- the things you own (your assets) and any savings are worth £300 or less. However, if you have a motor vehicle, this must be worth £1,000 or less unless it has been specially adapted because you have a physical disability
- in the last 3 years you must have lived, had a property or carried on a business in England or Wales.
Only certain types of debt can be included in a debt relief order. These are called qualifying debts and are debts such as:
- credit cards, overdrafts, loans
- rent, utilities, telephone, council tax
- benefit overpayments, unless the benefit was obtained by fraud
- hire purchase or conditional sale agreements
- buy now - pay later agreements.
If you’re behind on your rent, your landlord can still take action to get their property back, even if the rent arrears are included in your DRO.
If you have a hire purchase or conditional agreement, you may have to return the goods bought with these loans, unless someone else can pay the instalments. You will not be able to carry on paying for the goods once you have a debt relief order.
For more information about different types of loans, including hire purchase and conditional sale agreements, see Credit.
Certain types of debt can't be included in a debt relief order. You must pay these separately. People you owe these debts to can still take action against you, even if you have a debt relief order. These debts include:
- court fines and confiscation orders. These are fines relating to criminal activity
- child support and maintenance
- student loans
- social fund loans.
For more information about child support and maintenance, see Child support and maintenance arrears in Credit and debt fact sheets.
Spare available income
When you work out how much spare available income you've got, you must count all the money you've got coming into your household. This could include:
- your salary or wages
- welfare benefits, such as Jobseeker's Allowance and Employment and Support Allowance
- your pension
- contributions from other household members
- any rental income.
You will be able to deduct a reasonable amount for your everyday needs. If the figure left over each month is less than £50 then you may be able to apply for a debt relief order if you meet the other conditions.
For more information about how to work out your spare available income, see How to work out your budget.
Assets are the things of value that you own.
If your assets are worth more than £300, or if you have a motor vehicle worth more than £1,000, you won't be able to apply for a debt relief order.
Examples of assets include savings, vehicles, shares, antiques and property. This means that if you own a property, it's very unlikely that you will be able to apply for a debt relief order. It makes no difference whether you own the property outright or you have a mortgage on it.
If you have not retired, but have a private or occupational pension fund, in most cases the value of your pension fund won’t count towards the £300 limit. But there are some exceptions so you’ll need to check with an adviser if you want to apply for a DRO.
If you have retired, and are receiving payments from your pension fund, the payments will be regarded as income rather than an asset.
When you work out the value of your assets, there are some items you don't need to take into account. These include:
- household equipment such as bedding, clothing and furniture
- tools, books and other items of equipment you use in your job or business
- a car which has been specially adapted because you have a physical disability and which you need to carry out your everyday activities
- a motor vehicle worth less than £1,000.
Who can't get a debt relief order
You won't be able to get a debt relief order if:
- you're currently bankrupt
- you have an Individual Voluntary Arrangement (IVA) or are applying for an IVA
- your creditors have applied to make you bankrupt but the hearing hasn't yet taken place. But you might still be able to apply for a debt relief order if your creditors agree
- you have been given a Bankruptcy Restrictions Order or Undertaking
- you have petitioned for bankruptcy but your petition has not yet been dealt with. However, this doesn’t apply if you’ve petitioned for bankruptcy and the judge has referred you for a debt relief order instead
- you have had a debt relief order in the last 6 years
- you have been given a Debt Relief Restriction Order or Undertaking.
For more information about Individual Voluntary Arrangements and Bankruptcy Restrictions Orders, see Help with debt.
Debt relief orders are administered by the Official Receiver through the Insolvency Service.
You can only apply for a debt relief order online through an approved third party, or intermediary. An intermediary is usually a skilled debt adviser who has been given permission to complete the forms and give advice on debt relief orders.
You can find intermediaries at your local Citizens Advice Bureau. To search for details of your nearest CAB, click on nearest CAB. You can also find intermediaries by contacting any of the competent authorities listed on the Insolvency Service website at www.bis.gov.uk/insolvency.
You will have to pay a fee of £90 to apply for a debt relief order. You must pay your fee in cash at a Payzone outlet. A list of outlets can be found at www.payzone.co.uk. You can pay in instalments over a six month period. However, the Official Receiver won't consider your application until you have paid the fee in full. Once you've sent in your application, you won't be able to get the fee back.
Once the application is received and you have paid the fee, the Official Receiver can make the order as long as you meet all the conditions. It is an offence to give false or misleading information in your application.
Once your debt relief order has been approved you should not pay any of the creditors listed on the order. Your creditors will be told about the debt relief order and you will be protected from them taking any action.
Your debt relief order will be published on the Individual Insolvency Register at: www.bis.gov.uk/insolvency. The register is available to the public. Your name and address will remain on the register for 15 months.
There are certain things you must not do before you apply for a debt relief order or during the debt relief order. These include:
- hiding, destroying or faking any books or documents up to one year before you apply for a debt relief order and during the debt relief order period
- not telling the Official Receiver of any change in your circumstances that would affect your application between making the application and the order being granted
- giving away or selling things of value for less than they're worth to help you qualify for getting a debt relief order.
If you are found guilty of doing any of these things, you will be committing an offence. This could lead to the Official Receiver refusing to grant you an order. In more serious cases, you could even be prosecuted and fined, sent to prison or both.
If you have already been granted a debt relief order, the Official Receiver might apply for a Debt Relief Restriction Order, or your debt relief order might be taken away.
You will not be found guilty of an offence if you can show that you didn't intend to defraud anyone or hide information.
If you want to apply for a debt relief order you can contact your nearest Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
During the period of your debt relief order, you won't need to make any payments towards the debts listed in the order. The creditors of these debts won't be able to take any action against you. A debt relief order normally lasts twelve months.
However, you will need to continue to pay your normal household expenses which may include rent, council tax, gas, electricity and water charges. You will also need to pay off any debts that are not included in the debt relief order.
You can't add new debts to the debt relief order or debts that you forgot about. You will, however, have to tell the Official Receiver about any new debts which you get during the period of the order.
You must tell the Official Receiver if your circumstances change once you have a debt relief order or if you forgot to include information in the order.
If you have a benefit overpayment that the Department for Work and Pensions has told you about, this should be included in your debt relief order, unless the overpayment was the result of fraud. However, outstanding social fund loans cannot be included in a debt relief order.
If you are unsure whether a benefit overpayment can be included in a debt relief order you should get advice from an experienced adviser. They may not be allowed to carry on making these deductions.
You can get advice from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
For more information about Social Fund loans, see Help for people on a low income – the Social Fund.
Your debt relief order will appear on your credit file. It will remain on your file for six years. This may affect your ability to get credit in the future.
You may find it difficult to open a bank account once you have a debt relief order.
While a debt relief order is in place, there are certain things you won't be able to do. These are called restrictions and include:
- getting credit over £500 without telling the lender you have a debt relief order
- carrying on a business in a different name from the one under which you were given a debt relief order, without telling all those you do business with the name under which you were granted a debt relief order.
- being involved with promoting, managing, or setting up a limited company, without permission from court. Also, you can't act as a company director, without getting permission from court.
If the Official Receiver believes that you have provided wrong information or been dishonest they can apply for a Debt Relief Restriction Order.
If you are given a Debt Relief Restriction Order, this means that the restrictions on the things you can do can last from 2 to 15 years.
However, the debt relief order period will still end after twelve months and you won't have to pay off any of the debts included in the order.
If you don't follow the restrictions, you will be committing an offence. This could lead to imprisonment or a fine.
You must tell the Official Receiver if there are any changes in your circumstances during the period of the debt relief order. These changes may include:
- anything which you realise is wrong or has been missed out from the information you've given
- any increase in your income
- any additional money or valuables that you acquire, for example, money left in a will.
If you fail to tell the Official Receiver of a change in circumstances like these, you may be committing an offence. This could lead to the debt relief order being taken away from you. This would mean you will have to make arrangements to pay your creditors.
All of the debts that are listed on your order will be written off and you will no longer have to pay them.
You will have to pay any debts not included in the debt relief order which are still unpaid.
You can only apply for a debt relief order once every six years.