What is a debt relief order (DRO) & how does it work?
A debt relief order (DRO) is a way of dealing with relatively small debts if you’re not a homeowner, you don’t own anything of much value and you have very little disposable income.
How does a DRO work?
If you can’t afford to pay your debts and you meet the criteria, you may be able to apply for a debt relief order.
A DRO lasts for 12 months. During that time, the debts included in your DRO are frozen and you don’t need to make payments.
At the end of the 12 months, if your financial situation hasn't improved, those debts are written off.
Who can apply for a DRO?
You may be able to apply for a debt relief order if you:
- can’t pay your debts
- owe £50,000 or less
- have £75 or less left over each month after covering your essential household expenses
- aren't a homeowner
- don’t have savings or possessions worth more than £2,000 (not counting basic household items or tools you need to do your job)
- haven’t had a DRO in the last six years
- don’t have an IVA and you’re not going through bankruptcy
- lived, had a property, or worked in England or Wales in the last three years
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What debts can be included in a debt relief order?
Most non-priority debts can be included in debt relief order. A debt is either priority or non-priority depending on how serious the possible consequences are if you don’t pay.
The possible consequences of not paying non-priority debts are less serious than for priority debts. Despite being less serious, your creditors could still take you to court or arrange for bailiffs to visit you.
The main non-priority debts that can be included in a DRO are:
- credit cards
- hire purchase agreements that aren’t for essential items (e.g. a TV)
- unsecured loans (where you don’t use your home as security)
- buy now pay later
- store cards
- overdrafts
- catalogues
- water bill arrears
- money borrowed from friends and family
What does a DRO mean for my credit rating?
A debt relief order will appear on your credit file for six years from the date it’s approved. You’re likely to find it difficult to borrow during that time.
Find out more in our guide on debt relief orders (DROs) and your credit file.
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