A Debt Relief Order, or DRO, is one of the strongest debt write-off options for people with low income and limited assets. If it is approved, qualifying debts are frozen for 12 months. If your circumstances do not improve significantly during that period, those debts are written off.
The attraction is obvious: no monthly debt repayment and no DRO application fee. The trade-off is that the rules are strict and it is a formal insolvency solution.
Who is a DRO for?#
A DRO is designed for people who cannot realistically repay their debts and have very little spare income or assets.
It may be suitable if:
- your qualifying debts are £50,000 or less
- your spare income is £75 a month or less
- your assets are within the DRO limits
- you do not own a home
- you live in England or Wales, or meet the connection rules
- you have not had a DRO in the last six years
It is not suitable if you can afford meaningful monthly payments, own property, have assets above the limit, or need to avoid formal insolvency.
DRO eligibility rules#
The key DRO rules are strict. You usually need to meet all of them.
| Rule | Current position in England and Wales |
|---|---|
| Qualifying debt limit | £50,000 or less |
| Spare income | £75 a month or less after essential costs |
| General assets | £2,000 or less |
| Vehicle | One domestic vehicle worth up to £4,000 |
| Home ownership | Usually not allowed |
| Previous DRO | No DRO in the last six years |
| Application | Must be submitted by an approved intermediary |
These limits are one reason a DRO can be more suitable than an IVA for someone with low income, but unavailable for someone with a home or higher spare income.
What debts can a DRO include?#
Most unsecured debts can be included.
| Usually included | Usually excluded |
|---|---|
| Credit cards | Student loans |
| Personal loans | Court fines |
| Overdrafts | Child maintenance |
| Store cards and catalogues | Social Fund loans |
| Payday loans | TV licence arrears |
| Utility arrears | Personal injury damages |
| Council tax arrears | Debts from fraud may not be written off |
| Rent arrears | New debts after the DRO is made |
You must keep paying ongoing household bills after the DRO starts. Rent arrears may be included, but your current rent still has to be paid.
What happens during the 12 months?#
The 12-month period is called the moratorium.
During that time, creditors included in the DRO usually cannot:
- chase you for payment
- add interest or charges
- start most new enforcement action
- send enforcement agents for included debts
You usually do not make payments toward the included debts.
You must:
- tell the Official Receiver if your circumstances improve
- avoid borrowing more than £500 without telling the lender about the DRO
- follow business and company directorship restrictions
- keep paying ongoing bills and excluded debts
If your income, assets or circumstances improve significantly, the DRO can be revoked. If it is revoked, the debts are no longer protected.
What happens after 12 months?#
If your circumstances have not improved enough to make repayment realistic, qualifying debts in the DRO are written off at the end of the 12 months.
The DRO will still affect your credit file. It normally remains there for six years from the approval date. It will also appear on the Individual Insolvency Register during the DRO and for a short period afterwards.
How to apply for a DRO#
You cannot submit a DRO application directly. You must apply through an approved intermediary, usually a debt adviser.
The adviser will check:
- your income
- benefits
- household spending
- debts and balances
- assets
- vehicle value
- property ownership
- whether another option would be better
If a DRO is suitable, the intermediary submits the application to the Insolvency Service. The Official Receiver then decides whether to approve it.
DRO vs IVA#
A DRO and IVA both involve formal debt write-off, but they are for different situations.
| Feature | DRO | IVA |
|---|---|---|
| Typical use | Low income, few assets | Regular spare income and larger unsecured debts |
| Monthly payments | Usually none | Usually monthly payments |
| Duration | 12 months | Usually 5 or 6 years |
| Debt limit | £50,000 qualifying debts | No fixed legal debt limit |
| Homeowners | Usually not eligible | Can be suitable for homeowners |
| Asset rules | Strict | More flexible |
| Credit file | Six years | Six years |
If you qualify for a DRO, it may be better than an IVA because it is shorter and does not require payments. If you do not qualify, an IVA may still offer a structured route.
For the fuller side-by-side decision guide, read IVA vs Debt Relief Order.
DRO vs DMP#
A Debt Management Plan is informal and aims to repay debts in full. A DRO is formal and can write off qualifying debts after 12 months.
A DMP may be better if you can afford to repay and want to avoid insolvency. A DRO may be better if you cannot afford repayments and meet the strict criteria.
DRO vs bankruptcy#
Bankruptcy can be used where debts, income or assets are outside DRO limits. It may write off debts after 12 months, but it has a fee and stronger asset consequences.
If you qualify for a DRO, it is often the lower-cost route. If you do not qualify because your debts or assets are too high, bankruptcy or an IVA may need to be considered.
Common DRO mistakes#
Avoid these before applying:
- guessing creditor balances
- leaving debts out because they feel embarrassing
- transferring assets to someone else
- selling assets for less than they are worth
- ignoring joint debts
- assuming a car on finance is treated the same as a car you own outright
- applying without checking how the DRO affects your job or bank account
When an IVA may be better#
An IVA may be better if:
- you own a home
- your debts are over the DRO limit
- you have spare income above the DRO limit
- you need to protect assets that would prevent a DRO
- creditors are likely to accept monthly payments
If that sounds like your situation, use the IVA calculator before applying for anything formal.
If you are still deciding between routes, compare IVA vs Debt Relief Order and IVA vs Debt Management Plan before committing to a formal application. SourcesSources checked for this guide