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How does a DRO work?

A DRO is an alternative to bankruptcy that can help you deal with certain types of debt if you:

• do not own your home
  
• have little spare income
  
• have little chance of your financial situation improving

They are issued by the Official Receiver (an officer of the bankruptcy court) who will write to your creditors (people you owe money to) explaining that:

• they can’t take any action to recover their money without permission from the court
  
• you are not allowed to make any payments towards your debts
  
• you will be discharged (freed) from your debts when the DRO ends – usually after 12 months

A DRO can be amended or cancelled if your financial situation improves. You can get free advice about what will happen if your financial situation improves from organisations like the National Debtline.

• Debt - where to get free help and advice

• National Debtline DRO factsheet Opens new window

Conditions to get a DRO

To get a DRO you must:

• owe less than £15,000
  
• have less than £50 a month spare income – after paying essential bills like rent or food
  
• have less than £300 worth of assets – motor vehicles are not included in this limit, you can usually keep your car if it is worth less than £1000 or you need it because you have a disability
  
• live, run a business or own a property in England or Wales – or have done so in the last three years
  
• not have applied for a DRO in the last six years

Contact an authorised debt adviser for help with the full conditions and what your options are if you are already involved in another formal insolvency procedure (like bankruptcy).

Your local Citizens Advice Bureau or the National Debtline can give you a list of authorised debt advisers in your area.

Debts that can’t be included in your DRO

Some types of debt can’t be included in a DRO, these are usually:

• court fines
  
• family maintenance payments
  
• student loans
  
• debts created after your DRO has been issued
  

You can get help identifying and dealing with these types of debt from organisations like Citizens Advice and the National Debtline.

DRO application process

To get a DRO you must get an authorised debt adviser to send an application form to the Official Receiver.

Step one: contact your local Citizens Advice Bureau or the National Debtline for a list of authorised debt advisers in your area. The authorised debt adviser will:

• check you meet the conditions to qualify for a DRO
  
• help you complete the application form – for example, work out interest payments
  
• send your application form to the Official Receiver – you can’t send it directly

Step two: you must pay a £90 fee before the Official Receiver will consider your application. Your authorised debt adviser can advise you about paying in instalments or contact your local Citizens Advice Bureau for information on charities that can help.

Step three: the Official Receiver will asses your DRO application and can:

• issue a DRO
  
• ask you for more financial information – for example, bank statements
  
• reject your application

If your application is rejected, you can get free debt advice from organisations like Citizens Advice and the National Debtline.

Complaints

If you want to complain about an authorised debt adviser, contact their authorising body. Your debt adviser can provide you with these details. Complaints about the Official Receiver are dealt with by The Insolvency Service.

• Find your local Citizens Advice Bureau

• National Debtline DRO factsheet Opens new window

• Help with PDF files

• Complain about the Official Receiver to The Insolvency Service

How a DRO affects you

Your DRO will be listed on the Individual Insolvency Register, an online database used by credit reference agencies to update your credit rating. This record will be removed three months after your DRO ends.

Credit reference agencies keep DRO records for six years, making it harder for you to open new bank accounts or get credit.

• The Individual Insolvency Register

• Credit reference agencies Opens new window

Your responsibilities after a DRO has been issued DRO

You must tell your bank or building society that you have a DRO, they will decide if you can continue using your accounts. You must co-operate with the Official Receiver and report any changes to your financial situation as this can affect your DRO.

It is a criminal offence to break any of the following DRO restrictions:

• borrow more than £500 without telling the lender about your DRO
  
• act as the director of a company
  
• create, manage or promote a company without the court’s permission
  
• manage a business without telling those you do business with about your DRO
  
• work as an insolvency practitioner (an authorised debt specialist)

Contact your local Citizens Advice Bureau or the National Debtline for free help and advice on how these restrictions can affect you.

How long do the DRO restrictions last?

DRO restrictions usually finish when your DRO ends. They can continue for up to 15 years if careless, criminal or dishonest behaviour (like fraud) led to your debt problem.

Step one: the Official Receiver will investigate the cause(s) of your debt problem. You must co-operate and provide any financial information they ask for.

Step two: if there is evidence of careless, criminal or dishonest behaviour, the Official Receiver will ask you to agree to continue with the DRO restrictions.

If you agree, you will not have to go to court and the length of time the restrictions continue for can be reduced. This type of agreement is called a debt relief restrictions undertaking (DRRU).

If you don’t agree, you will have to go to court. The Official Receiver will ask the court to issue an order continuing the restrictions. This order is called a debt relief restrictions order. You should get independent legal advice if you go to court.

Step three: the Official Receiver will write to you confirming how long the DRO restrictions will last. These details will also be published on the Individual Insolvency Register.

• Find a solicitor or advice agency

• Contact your Official Receiver

• The Individual Insolvency Register

More useful links

• Debt - where to get free help and advice

• Dealing with debt problems - a guide

• Bankruptcy - a guide

Useful contacts

• Money, tax and benefits contacts