What is a Debt Relief Order?
A Debt Relief Order (DRO) is a form of insolvency designed for people with low income, minimal assets, and relatively modest debts. Often described as "the poor person's bankruptcy," it provides the same debt relief as bankruptcy but costs just £90 instead of £680.
Introduced in 2009, DROs help those trapped in debt with no realistic way to pay. After 12 months, all included debts are written off completely, giving you a fresh financial start without making any payments to creditors.
Key Point
A DRO freezes your debts for 12 months. If your situation hasn't improved after this moratorium period, the debts are written off entirely. During the DRO, creditors cannot contact you or take action.
DRO vs Bankruptcy Comparison
| Feature | DRO | Bankruptcy |
|---|---|---|
| Cost | £90 | £680 |
| Duration | 12 months | 12 months |
| Maximum debt | £50,000 | No limit |
| Asset limit | £2,000 | No limit (but may lose) |
| Can own property | No | Yes (but may lose) |
| Monthly payments | None | IPA if affordable |
| Credit file impact | 6 years | 6 years |
Who Are DROs Designed For?
DROs specifically help people who:
- Survive on benefits or very low wages
- Have no valuable possessions to sell
- Rent rather than own their home
- Cannot afford the £680 bankruptcy fee
- Have no realistic prospect of their situation improving
Full DRO Eligibility Criteria
You must meet ALL of these criteria to qualify for a DRO. Missing even one means you'll need to consider alternatives.
1. Debt Limit: Maximum £50,000
Your total qualifying debts must not exceed £50,000. This limit increased from £30,000 in April 2024, making DROs available to more people. Include all unsecured debts except student loans and court fines.
2. Asset Limit: Maximum £2,000
Your total assets cannot exceed £2,000. Assets include:
- Savings and cash
- Valuable items (jewellery, antiques)
- Investments and shares
- Multiple vehicles (only one car allowed)
Assets DON'T include:
- Essential household items
- Clothing and bedding
- Tools for work (up to £2,000)
- One car worth under £4,000
3. Vehicle Limit: Maximum £4,000
You can own one vehicle worth up to £4,000 if you need it for:
- Getting to work
- Medical appointments
- Caring for family members
- Your disability
Cars on finance don't count as you don't own them until fully paid.
4. Disposable Income: Maximum £75 per month
After paying for essentials, you must have less than £75 monthly left over. Essentials include:
- Rent or mortgage
- Council tax and utilities
- Food and housekeeping
- Clothing and transport
- Childcare and prescriptions
- Insurance and phone
5. Property Ownership
You cannot own property or land anywhere in the world. This includes:
- Your home (even with negative equity)
- Buy-to-let properties
- Inherited property shares
- Land or timeshares
6. Recent Insolvency
You cannot have had a DRO in the last 6 years or be currently subject to:
- Another DRO
- IVA
- Bankruptcy proceedings
- Bankruptcy Restrictions Order
7. Residency
You must have lived, worked, or had a property in England, Wales, or Northern Ireland in the last 3 years. Scotland has a different system called Minimal Asset Process (MAP).
Important
Your approved intermediary will verify all information. Providing false information is a criminal offence and can result in prosecution.
Which Debts Are Included in a DRO?
Understanding which debts a DRO covers is crucial for determining if it's the right solution.
✅ Debts INCLUDED in a DRO
- Credit cards and store cards
- Personal loans and payday loans
- Overdrafts
- Catalogue debts
- Council tax arrears
- Rent arrears
- Utility bills (gas, electric, water)
- Benefit overpayments
- Hire purchase agreements (after goods returned)
- Business debts (if sole trader)
- CCJs
❌ Debts NOT INCLUDED in a DRO
- Student loans
- Court fines and penalties
- Child maintenance arrears
- Social fund loans
- Debts from fraud
- Personal injury compensation orders
- TV licence arrears
- Secured loans (mortgages)
- Debts incurred after DRO application
Council Tax and Rent
While arrears are included, you must keep paying current council tax and rent during the DRO. Failure to pay ongoing bills could lead to eviction or enforcement action.
How to Apply for a DRO
You cannot apply for a DRO yourself - you must go through an approved intermediary. The process typically takes 2-4 weeks from start to approval.
Step-by-Step Application Process
Find an Approved Intermediary
Time: Same day
Contact Citizens Advice, StepChange, or another approved organization. All provide free DRO application services.
Initial Assessment
Time: 1-2 hours
Advisor reviews your debts, income, and assets to confirm DRO eligibility. They'll suggest alternatives if you don't qualify.
Gather Documents
Time: 1 week
Collect bank statements, benefit letters, bills, and creditor details. List all debts with exact amounts owed.
Complete Application
Time: 2-3 hours
Work with intermediary to complete detailed application including income, expenses, assets, and debts.
Pay Fee
Time: Varies
Pay £90 fee (can pay in instalments over 6 months). Some charities offer grants in hardship cases.
Submission
Time: Immediate
Intermediary submits application online to Insolvency Service.
Official Receiver Review
Time: 2-10 days
Official Receiver checks application. May request additional information.
DRO Approved
Time: Immediate upon approval
DRO starts immediately. Creditors notified and must stop all contact.
Where to Find Approved Intermediaries
- Citizens Advice: 0800 144 8848 (free, face-to-face available)
- StepChange: 0800 138 1111 (free, mainly phone/online)
- National Debtline: 0808 808 4000 (free, phone advice)
- Local debt charities: Check Turn2Us grant search
Life During Your DRO
A DRO lasts exactly 12 months. During this moratorium period, your life continues largely as normal, but with important restrictions.
What Happens to Creditors?
- All contact must stop immediately
- No enforcement action allowed
- Interest and charges frozen
- Court action suspended
- Bailiffs cannot visit
Your Obligations
During the 12 months, you must:
- Report any increase in income over £75/month
- Report inheritance or lottery wins
- Report new assets acquired
- Not take credit over £500 without declaring DRO
- Continue paying ongoing bills (rent, utilities)
- Cooperate with Official Receiver if contacted
What If Your Circumstances Change?
If your situation improves significantly, your DRO may be revoked. This happens if:
- Income increases by more than £75/month
- You receive a lump sum over £2,000
- You inherit money or property
- You fail to declare changes
4%
of DROs are revoked due to changes in circumstances
DRO Restrictions
While less severe than bankruptcy, DROs come with important restrictions:
During the DRO (12 months)
- Credit restriction: Cannot obtain credit over £500 without disclosing DRO
- Business restrictions: Cannot be company director without court permission
- Cannot act as: Charity trustee, school governor, or in certain public offices
- Name changes: Must notify Insolvency Service of any name changes
- Self-employment: Must disclose DRO when trading
Debt Relief Restrictions Order (DRRO)
If you've been dishonest or reckless, restrictions can be extended 2-15 years through a DRRO. Reasons include:
- Hiding assets or income
- Providing false information
- Getting a DRO when you knew you didn't qualify
- Excessive gambling or speculation
- Not cooperating with Official Receiver
Public Record
Your DRO appears on:
- Individual Insolvency Register: Public record for 15 months
- Credit reference files: 6 years from start date
- Internal creditor records: Indefinitely
Advantages and Disadvantages
Advantages of a DRO
- Only costs £90
- All included debts written off after 12 months
- No monthly payments required
- Creditors must stop all contact
- Legal protection from enforcement
- Keep essential items and car (if under £4,000)
- Process managed by professional intermediary
- Fresh start after one year
Disadvantages of a DRO
- Strict eligibility criteria
- 6-year impact on credit file
- Cannot own any property
- Public record of insolvency
- Some debts not included
- Professional restrictions
- Can be revoked if situation improves
- Cannot get another DRO for 6 years
Who Should Consider a DRO?
A DRO is ideal if you:
- Have no realistic way to pay your debts
- Live on benefits or very low income
- Don't own property or valuable assets
- Cannot afford bankruptcy fees
- Want the quickest route to being debt-free
Who Should Avoid a DRO?
Consider alternatives if you:
- Expect your income to increase soon
- Own property (even with negative equity)
- Have assets worth over £2,000
- Need credit for business purposes
- Work in financial services or law
Life After Your DRO
After 12 months, you're automatically discharged and can start rebuilding your finances.
What Happens at Discharge?
- All included debts written off completely
- Removed from Insolvency Register after 3 months
- Restrictions on credit and directorships end
- Free to save and build assets
- Can apply for credit (though still on credit file)
Rebuilding Your Credit
Timeline for credit recovery:
| Timeframe | Credit Access | Typical Products Available |
|---|---|---|
| Year 0-1 (During DRO) | Very limited | Basic bank account only |
| Year 1-3 | Limited | Credit builder cards, high-cost credit |
| Year 3-5 | Improving | Some mainstream credit, higher rates |
| Year 5-6 | Near normal | Most products, slightly higher rates |
| After 6 years | Normal | Full market access at standard rates |
Tips for Financial Recovery
- Budget carefully: Avoid falling back into debt
- Build emergency fund: Start with £100, aim for £1,000
- Use credit wisely: Credit builder card paid in full monthly
- Check credit reports: Ensure DRO marked correctly
- Register to vote: Improves credit score
- Avoid payday loans: Damages credit recovery
If You Don't Qualify for a DRO
If you narrowly miss DRO criteria, consider these alternatives:
Slightly Over Asset Limit
- Wait and reapply if car depreciates
- Use savings to pay priority debts first
- Consider selling non-essential assets
Income Over £75/month
- Debt Management Plan: Affordable monthly payments
- IVA: If you can afford £100+/month
- Token payments: £1/month to each creditor
Debts Over £50,000
- Bankruptcy: No debt limit but costs £680
- IVA: Typically 5-6 years of payments
- Full and final settlements: If you have lump sums
Own Property
- IVA: Can protect your home
- Secured loan consolidation: Risky but possible
- Sell property: Clear debts with equity
Free Advice Available
If you don't qualify for a DRO, your approved intermediary will explain alternatives and help you find the best solution for your situation.
Frequently Asked Questions
What is the maximum debt for a DRO in 2026?
The maximum total debt for a DRO is £50,000 as of April 2024. This increased from the previous £30,000 limit. This includes all qualifying debts but excludes secured debts like mortgages.
How much does a DRO cost?
A DRO costs £90 in total. This is a one-off fee paid to the Insolvency Service. You can pay in instalments over 6 months if needed. Some charities may help with the fee in exceptional circumstances.
Can I keep my car with a DRO?
You can keep a car worth up to £4,000 if you need it for work, medical appointments, or family care. If your car is worth more, you won't qualify for a DRO. Cars on finance don't count as assets as you don't own them.
What happens after 12 months of a DRO?
After 12 months, you're discharged from your DRO and all included debts are written off completely. The DRO stays on your credit file for 6 years total, but you're free to rebuild your finances with no further payments required.
Can I rent a property during a DRO?
Yes, you can rent during a DRO. Your current tenancy isn't affected, and you can move to a new rental. However, landlords doing credit checks may see the DRO, so you might need a guarantor or larger deposit.
What debts aren't included in a DRO?
Student loans, court fines, child maintenance, social fund loans, and debts from fraud aren't included in a DRO. These remain payable. Most other unsecured debts including credit cards, loans, overdrafts, and utility arrears are included.
Can I apply for a DRO myself?
No, you must apply through an approved intermediary (debt advisor). They're usually found at Citizens Advice, StepChange, or other free debt charities. The intermediary checks eligibility and submits your application.