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DRO guide
Free, ImpartialDebt Advice
StepChange Debt CharityDRO Guide
Contents
Introduction How this guide will help you 3
Section 1 DROs 4• Whatisadebtrelief order?
• Debtrelief ordercriteria
• HowdoIapplyforadebtrelief order?
• Whatdebtsareincludedinadebtrelief order?
• Whatassetsareincludedinadebtrelief order?
• WhathappenswhenIamonadebtrelief order?
• WhathappenswhenmyDROhasfinished?
Section 2 Other debt solutions 10• Debtmanagementplan(DMP)
• Bankruptcy
• TemporaryPaymentArrangement
Section 3 Our debt help 13• Howcanwehelp
• Contactus
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StepChange Debt CharityDRO Guide
Introduction
Free anonymous debt adviceFreedebthelponlinefromStepChangeDebtCharityatwww.stepchange.org
How this guide will help you
StepChangeDebtCharityistheleadingUKdebtcharity.Everyyearwehelphundredsofthousandsof peoplebeatproblemdebt.Wegivefree,realisticdebtadviceandprovidearangeof debtsolutions.
If you’restrugglingwithdebtrepaymentsanoptiontoconsidermaybeadebtrelief order(DRO).ADROisaformof insolvency.Therearestrictqualifyingcriteriathatyouneedtomeetbeforeyoucanapply.
ThisguidewillgiveyoualltheinformationyouneedaboutDROs.It’llhelpyoutodecidewhetheraDROisthebestsolutionforyou.
Theguideexplains:
•WhataDROis
•WhoaDROissuitablefor
•WhattoexpectwhenyouapplyforaDRO
•Howwecanhelp
Whyus?
Wehaveaspecialistteamwhocanhelpandsupportyouthroughthewholeapplicationprocess.Wedon’ttakefeesforouradviceorsupportatanypoint.
Toseeif youmeettheDROcriteriauseouronlineStepChangeDebtRemedytool.Or,callourfreephoneHelplineon08001381111tospeaktooneof ourqualifieddebtadvisors.
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StepChange Debt CharityDRO Guide
DROs
What is a debt relief order?
ADROisaformof insolvencycosting£90.ItwasintroducedbytheGovernmentin2009forpeopleonlowerincomeswhoareunabletopaytheirdebtsback.
DROsaresuitableforpeoplewhosefinancialsituationisunlikelytoimproveintheforeseeablefuture.DROsaregrantedbyanofficialreceiver.Ifyourapplicationissuccessfulyouwillbecomedebtfreeandabletomakeafreshstart.
AssoonasyourDROapplicationhasbeensubmittedyourcreditorsarenolongerallowedtocontactyou.Thismeansnomorelettersorcontactfromthem.
Yourdebtswillthenbewrittenoffafter12monthsunlessyourcircumstancesimprove.YoudonothavetomakeanypaymentstocreditorsincludedintheDROoncetheofficialreceiverhasapprovedyourapplication.
Free,impartialdebtrelief orderadvice
ADROisalegalprocedurewithimplicationsandrestrictionsyoumustabideby.Westronglyrecommendthatyougetprofessional,impartialadvicebeforeapplying.
OurdebtadvisorsandonlineStepChangeDebtRemedytoolcangiveyouthefree,realisticdebtadviceyouneedtofindoutwhichsolutionisbestforyou.
If itisadebtrelief orderourspecialistDROteamcanhelpyouthroughtheprocess.
Free debt adviceFreedebthelpfromStepChangeDebtCharitycall0800 138 1111
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StepChange Debt CharityDRO Guide
DROs
Debt relief order criteria
Debtrelief ordersaredesignedforthemostfinanciallyvulnerablesothequalifyingcriteriaisstrict.YourapplicationmustbetrueandaccurateandTheInsolvencyServicewillnotreturnthefeepaidif declined.
Eligibility
TheinformationyousubmitmustbetrueandaccurateasitisanoffencetomisleadtheOfficialReceiveraboutyoursituation.
NoteveryonewillqualifyforaDRO.TobeeligibleforaDROyouneedtomeetthefollowingcriteria:
•Yourcurrentdebtbalancesmustnottotalmorethan£20,000
•Youcannotownassetsworthmorethan£1000
•Youmusthavenomorethan£50leftovereachmonthafterpayingyourhouseholdbills
•Youcannotownadomesticvehiclethatisworthmorethan£1,000
•YoumustnotcurrentlyinvolvedinotherinsolvencyproceedingsorhadapreviousDROwithinthelastsixyears
•Youmusthavelived,hadapropertyorcarriedoutbusinessinEngland,WalesorNorthernIrelandinthelastthreeyears.
TheOfficialReceivercanperformaninvestigationaspartof theapplicationprocessandcanrejecttheorderif:
•Youhavegivenawaypropertyorotherassets,orsolditforlessthanitstruevalueinthelasttwoyears.
•If youhaveshownpreferentialtreatmentinthepaymentstosomeof yourcreditorsoverothersinthelasttwoyears.
Free anonymous debt adviceFreedebthelponlinefromStepChangeDebtCharityatwww.stepchange.org
How do I apply for a debt relief order?
Debtrelief ordersareadministeredbyanOfficialReceiveratTheInsolvencyService.Youcanonlyapplyforadebtrelief orderthroughanapprovedthirdpartywhoaredeemedtobeaCompetentAuthorityindebtadvice.
DROCompetentAuthorities
Weareoneof thefeworganisationsthatcansubmitadebtrelief orderapplication.Afulllistof theCompetentAuthoritiesisavailablefromTheInsolvencyService.
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StepChange Debt CharityDRO Guide
DROs
Debtrelief orderfee
ADROcostsonly£90whichmakesitalowcostformof insolvencyforpeopleunabletoaffordbankruptcy.ThefeeshouldbepaidstraighttotheInsolvencyServiceincashatanyPayzoneoutleteitherinfullorininstalmentsoveraperiodof sixmonths.
HoweverthefeedoesneedtobepaidinfullbeforetheOfficialReceiverwillconsideryourdebtrelieforderapplication.
Benefitsof DROapplicationprocesswithus
WehaveadedicatedDROteamthatwillhelpyouthrougheverystageof makinganapplication.
Asthe£90feeisnon-refundableandyoucanonlymakeaDROapplicationeverysixyearsitiscrucialthatyoumeetthequalifyingrequirementsandyourinformationistrueandaccurate.
WecancheckyourapplicationtoensureitisaccurateandfitsthequalifyingcriteriatogreatlyincreasethelikelihoodanapplicationisacceptedbyTheInsolvencyService.If thefeeispaidandyoufitallthequalifyingcriteriayourorderwillbegin.
What debts are included in adebt relief order?Onlycertaintypesof debts,called qualifyingdebts,canbeincludedinadebt relief orderandthesemustnotexceed£20,000.
TheInsolvencyServicecaninvestigateyourfinancialsituationaspartof thedebtrelief orderapplicationprocess.ItisanoffencetomisleadtheOfficialReceiveroromitinformationaboutyourlevelof debt.
Debtrelief orderdebts
Thefollowingtypesof qualifyingdebts,includingarrears,canbeincludedinyourdebtrelief orderapplication:
•Creditcarddebt,overdrafts,loans
•Rent,utilities,telephone,counciltax
•Socialloansorbenefitoverpayments
•Conditionalsaleorhirepurchase(HP)agreements
•Itemsboughtonfinance.
Youmustlistallof yourdebtaccuratelyincludingany accumulatinginterestupuntilthepointyousubmit yourapplication.TheInsolvencyServicemayreject anapplicationif theaccruedinteresttakesthelevel of debtoverthe£20,000limit.
HirePurchase(HP)
YoudonotownconditionalsaleorHPitemsuntiltheyarepaidoffandyoucannotcontinuepayingthemwhenonaDRO.Theitemswouldusuallyhavetobereturnedortransferredovertoanotherpersonalongwiththeresponsibilityof themonthlypayments.Youmaybeallowedtokeeptheitemsif they’reessentialandyouhavenoarrears.
Areanydebtsexcludedfromadebtrelief order?
Therearecertaintypesof debtthatyouareunabletoinclude.Youwouldstillbeliabletopaythefollowing:
•Studentloans
•Childsupportandmaintenance
•Criminalfines
•Securedloansormortgagepayments
•TVlicencearrears
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StepChange Debt CharityDRO Guide
DROs
What assets are included in adebt relief order?
Adebtrelief orderisaninsolvencyoptionforpeople withlowassetwealth.If yourassetstotalmorethan£1000invalue,youwillnotbe abletoapplyforaDRO.
Whatareassets?
Assetsareitemsof valuethatyouownthatcouldbesoldorconvertedintomoney.Thesecaninclude:
•Vehicles
•Property
•Antiques
•Shares
•Savings
It’sworthnotingthatyourassetsarevaluedbytheamountyouwouldreceiveif theywerere-soldintheircurrentconditionandnottheamountyoupurchasedthemfor.
Debtrelief orderandyourvehicle
Toqualifyforadebtrelief orderthetotalvalueof yourassetsmustnotbemorethan£1000invalue.If youownacarthenthiscannotbe worthmorethan£1,000.
Howisacarvalued?
TheintermediarywhosubmitsyourDROapplicationwillworkoutthevalueof yourcarbasedontypicalsaleprices.If yourcarisworthmoreorlessthanaverage,youcanprovideyourownindependentvaluationfromtwogarages.
CanIapplyfordebtrelief orderif Iownmyhome?
If youownaproperty,evenif itisinnegativeequityoryouownitoutright,itisstillanasset.Soyourdebtrelief orderapplicationwillnotbeaccepted.
Whatassetsareexcludedfromadebtrelief order?
ThereareafeweverydayitemsthattheOfficialReceiverwillnotconsiderwhentotallingupyourassetwealth.Thisincludesthefollowing:
•Householditemslikebedding,clothingandfurniture.
•Anythingusedforyouremploymentincludingtoolsorbooks
•Avehicleworthlessthan£1,000
•Avehiclethathasbeenadaptedtohelpwithaphysicaldisability.
Pensions
Apensionfundcouldbeconsideredanasset. Howeveritisnotcountedtowardsthe£1,000asset limit,evenif youhave notyetretired.If yourpensionfundisnotapproved byHMRC,yourpensionsavingsmaybetreatedasanasset.
Freeadvice
If yourassetwealthistoolargeforaDRObutstilllessthanyourtotaldebtbankruptcycouldbeamoreappropriateinsolvencyoption.Butthisisacomplexissueandit’simportantyougetexperthelpbeforemakinganymovestowardsbankruptcy.
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StepChange Debt CharityDRO Guide
DROs
What happens when I am on adebt relief order?
If theInsolvencyServiceacceptsyourdebtrelieforderapplicationitgenerallylastsfor12months.Whenyouareonadebtrelief orderyouaresubjecttocertainprotectionsandlimitations.
Moratoriumperiod
OnceyourDROisapproveda‘moratorium’periodisplacedonthedebtslistedintheorder.Thismeansyourcreditorscannottakeanyactiontorecovertheirdebt.If theydo,youshouldinformthemyouaresubjecttoadebtrelief order.
Whenthemoratoriumperiodends,if yourfinancialsituationhasnotimproved,thedebtsthatwereincludedintheoriginalapplicationarewrittenoff.Butyouwouldneedtocontinuepayingyourcurrenthouseholdbillsandexpensesincludingrent,counciltax,gas,electricityandwaterratesaswellasanyadditionaldebtstakenoutsincetheDROwasgranted.
CanIgetcreditwhileonadebtrelief order?
TheDROwillappearonyourcreditfileandonapublicregister.Itwillaffectyourcreditratingsoyoumaystruggletoobtainfurthercredit.Also,youmustinformthebankyouareonaDROif youareapplyingforanoverdraftover£500.
If you’restrugglingtoopenacurrentaccount,nearlyeverybankoffersabasicbankaccount.Mostbasicaccountsallowdirectdebitsandstandingordersaswellasacashcard,withsomeprovidingdebitcards.Butnonewillhaveanoverdraftfacility.
Whatcan’tIdoif Iamonadebtrelief order?
Forthelengthof yourDROtherearecertainthingsyoucannotdo.Thesearecalledrestrictionsandinclude:
•Gettingcreditover£500withoutinformingthelenderyou’reonaDRO
•CarryingonabusinessunderadifferentnamewithoutrevealingyourpreviousbusinesswassubjecttoaDRO
•SettingupaLimitedcompanyoractingasacompanydirectorwithoutpermissionfromacourt.
DebtRelief RestrictionOrder
If theInsolvencyServicebelievesyouhavebeenintentionallydishonesttheycanapplyforaDebtRelief RestrictionOrdertoextendtherestrictionsforupto15years.TheDROwouldstillendafterayearandthedebtswrittenoffbutfailuretoabidebytherestrictionextensionisacriminaloffencepunishablebyafineorimprisonment.
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StepChange Debt CharityDRO Guide
DROs
Whathappensif IamonaDROandmysituationchanges?
If yoursituationchangesyoushouldtelltheOfficialReceiverwho’llconsiderterminatingtheorder.Reasonsforthiscanbe:
•Takingoutnewdebtthatisover£500
•Anyimprovementinyourincome
•Receivinglumpsumsof moneyorassets
TheOfficialReceivercanalsoterminatetheDROiftheyuncoveranyintentionalinaccuraciesinyouroriginalapplication
It’syourresponsibilitytoinformtheOfficialReceiverof changesinyoursituation.It’sanoffensetogiveawayorhideassetsandyoumustco-operatewithTheInsolvencyServiceif askedto.
What happens when my DROhas finished?
If youhavefollowedtherestrictions,co-operatedwiththeOfficialReceiverandactedhonestlyduringthemoratoriumperiodaDROshouldleaveyoudebtfreeandabletomakeafreshfinancialstartwithinayear.
CreditoractionafteraDRO
Whenyourdebtrelief orderfinishesallof thequalifyingdebtsnamedintheorderwillbewrittenoffalongwithanyliabilitytopaythemback.
TheDROdoesnotprotectyoufromcreditoractionforanydebtyoumayhavetakenoutthatwasnotlistedintheoriginalapplication.
Youcanonlyapplyforadebtrelief orderonceeverysixyears.
CanIgetcreditafteradebtrelief order?
Adebtrelief orderisaformof insolvencysoitwillremainonyourcreditfileforsixyears.Creditorswillbeabletoseethiswhenyouapplyfornewcreditsoyoumayfinditdifficulttotakeoutcreditduringthistime.
If youstruggletoopenabankaccount,thereistheoptionof abasicbankaccount.Everybankoffersabasicaccount.
Free anonymous debt adviceFreedebthelponlinefromStepChangeDebtCharityatwww.stepchange.org
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StepChange Debt CharityDRO Guide
Other debt solutions
Thequalifyingcriteriaforadebtrelief orderisverystrictanddependentonyoursituationremainingthesamefor12months.
If youdonotqualifyforaDROoryouareonanorderandyoursituationchanges,therewillbeotherdebtsolutionsforyoutoconsider.
Werecommendyougetimpartial,professionaldebthelptoensureyougetthebestsolutionforyou.OuronlineStepChangeDebtRemedytoolcanhelpyouwiththis.
Inthemeantime,thispartof theguidewillsummarisesomeotherdebtsolutionswhichmaybebetterforyou:
•Debtmanagementplan(DMP)
•TokenPayment
•Bankruptcy.
Debt management plan (DMP)
Adebtmanagementplan(DMP)issuitableforpeoplewhohavesomemoneyleftovereachmonth,butnotenoughtocoveralltheirdebtrepayments.If youhavemorethan£50sparemoneyleftovereachmonthaDMPcouldallowyoutomakeasingle,affordablemonthlypaymenttowardsyourdebts.
HowdoesaDMPwork?
Adebtmanagementplanisnormallyarrangedthroughathirdparty.Thethirdpartywillworkouthowmuchyoucanrealisticallyaffordtopayeachmonth.Theywillthencontactyourcreditorstoaskthemtoacceptareducedmonthlypayment.
Theywillalsomanagethedistributionof themoneybetweenallyourcreditors,sothatyoudon’thavetodealwiththem.
•ADMPwilltakelongertorepayyourdebts
•Interestandchargeswillincreasethetotalbalanceyoupay
•ADMPwillaffectyourcreaditrating
HowmuchdoesaDMPcost?
ManycommercialdebtmanagementcompanieswillsetupaDMPforyou,butwillchargefeesfortheirservices.
ThereisnoneedtopayforaDMP.CharitieslikeourselvescansetupyourDMPfreeof charge;withnofeesattached.
Allthemoneyyoupayintoyourplanwillgotowardsclearingyourdebts.Wewillalsomakesurethatyouonlypaywhatyoucanafford,soyoucankeepupwithyourday-to-daylivingcostsaswell.
Free debt adviceFreedebthelpfromStepChangeDebtCharitycall0800 138 1111
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StepChange Debt CharityDRO Guide
Other debt solutions
Bankruptcy
Bankruptcyissuitableforpeoplewhoareunabletopayofftheirdebtswithinareasonabletime.Likethedebtrelief orderitisaformof insolvencybutwithouttherestrictionondebtleveloryourmonthlydisposableincome.
Howdoesbankruptcywork?
Bankruptcywritesoffmostunsecureddebts,allowingyoutomakeafreshfinancialstart.But,youwillbesubjecttoanumberof restrictionsduringbankruptcy,whichisusually12months.
Tofileforbankruptcy,youmustapplytothecourtandpayafee.Youmaybeexemptfrompayingpartof thefeeif youreceivecertainwelfarebenefits.
Youmayalsohavetomakemonthlypaymentstowardsyourdebtsaspartof anIncomePaymentArrangementforupto3years.
Howcouldbankruptcyaffectme?
Bankruptcycouldhavesignificantconsequencesforyourpersonalandprofessionallife.Youmayhavetosellyourhomeandtherecouldalsobeanimpactonyourjob,business,carandbankaccount.
Bankruptcywillalsoseriouslyaffectyourcreditratingforsixyearsfromthedateyouaremadebankruptandyourbankruptcywillappearonapublicregister.
Freebankruptcyadvice
Bankruptcyisabigsteptotakewithseriousimplications.If you’rethinkingaboutmakingyourselfbankrupt,talktousfirstandwewillgiveyouthedebthelpyouneed.
Free anonymous debt adviceFreedebthelponlinefromStepChangeDebtCharityatwww.stepchange.org
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StepChange Debt CharityDRO Guide
Other debt solutions
Temporary paymentarrangement
Temporarytokenpaymentsareasuitablearrangementforsomeonewithlittleornomoneytopaytheircreditdebtsoncelivingcostshavebeencovered.Theyaretoshowwillingnesstopaytowardsacreditdebtbuttheyarenotalongtermsolutiontoyourdebts.
Howdoesitwork?
If yourcircumstanceschangeandyou’reunabletomakeyournormalcreditre-paymentsit’simportantyoupaysomething.Atokenpayment,evenaverysmallamount,shouldbepaiduntilyoucanaffordtomakeyournormalpayments.
Whenworkingouthowmuchtooffer,essentialcostssuchasmortgageorrent,foodandutilitiesshouldbebudgetedinfull,andthenthesparemoneyissharedwiththecreditors.
Yourcreditorsmaynotacceptyouroffer,butinmanycasestheyarepreparedtobeflexibleespeciallyasyouaremakinganefforttotryandsolveyourproblems.
If theydoaccept,youshouldkeeptothearrangementandusethebreathingspaceyou’vebeengiventosolveyourfinancialdifficultiesforgood,whichmeansresistingthetemptationtoaddtothedebtbyborrowingmoremoneyasashort-termfix.
Free debt adviceFreedebthelpfromStepChangeDebtCharitycall0800 138 1111
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StepChange Debt CharityDRO Guide
Our debt help
How we can help
Millionsof peopleintheUKareworriedabouttheirdebtproblemssoit’simportanttorememberthatyouarenotalone.Eachyearwehelphundredsofthousandsof thosepeoplewithallsortsof debtproblems,bothbigandsmall.
Actnow
Nodebtproblemisunsolvablebutthelongeryouwaittotakeaction,theworseitislikelytogetandtheharderitwillbetotackle.Byactingnowyoucanbeginyourjourneytowardsbecomingdebtfree.Beginningtosolveyourdebtproblemwillliftthestressandworryyoufeelaboutyourdebts.
Whatyoucando
Wecanhelpyouwhateverstageyourdebtsareatbuttherearesomethingsyoucandotostopyourdebtproblemgettinganyworse:
•Don’textendyouroverdraftortakepaydayloans
•Stopusingyourcreditcards
•Don’tconsolidateyourdebtsintoadebtconsolidationloanwithoutgettingadvicefromusfirst
•Neversecureanyof yourdebtsagainstyourhomeandseekfree,professionaldebtadviceassoonasyoucan
Wecanhelp
If youhaveproblemdebtitcanbedifficulttoknowwheretoturn.Manycompaniesofferdifferentsolutionsandknowingwheretostartcanbedaunting.
We’lltakeanimpartialviewof yoursituationindetailandadviseyouonyouroptions.Youcanbeconfidentthatthesolutionwerecommendisbestforyou.
Contact us
AstheUK’sleadingdebthelpcharity,youcanbesurethatallouradviceisfree,confidentialandimpartial.
Ouronlinedebtadvice
OuronlineStepChangeDebtRemedytoolisavailable24hoursadaytogiveyoufree,anonymous,tailoreddebtadvice.
Ourtelephoneadvice
If youwouldprefertotalktosomeone,pleasecallourfreephoneHelplinenumber:08001381111*toarrangeatelephoneappointment.Ourlinesareopenfrom8amto8pm,MondaytoFridayandSaturday8amto4pm.
If youhavehearingdifficulties,ourfreetextphonenumberis08002940090.
*Callsmayberecordedandmonitoredforqualityandtrainingpurposes.Callsfrommobilesarefree.
Free anonymous debt adviceFreedebthelponlinefromStepChangeDebtCharityatwww.stepchange.org
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