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What is a DRO

What debts are included in a DRO?

Only certain types of debts, called qualifying debts, can be included in a debt relief order (DRO). These qualifying debts must not be more than £20,000 in value if you live in England or Wales, or £15,000 if you live in Northern Ireland.

Debts written off under a DRO

All of your debts need to be declared when you apply for a debt relief order (DRO).

If you forget a debt, you can’t add it after the DRO has started. You’ll have to pay it yourself, and in some cases your DRO might be revoked if the debt you forgot took your total debt over the permitted limit.

The following types of debt will be written off 12 months after your DRO is approved, if your situation hasn’t improved:

  • Arrears on household bills such as rent, gas, electric, telephone and council tax
  • Consumer debts such as credit card debt, payday loans, overdrafts, catalogues or store cards
  • Benefit overpayments, unless they were due to fraud
  • Hire purchase (HP) or conditional sale agreements
  • Items bought on finance, including anything bought on a buy-now-pay-later agreement
  • Loans from friends or family

During the 12 months of your DRO, known as the moratorium period, you won’t make any payments to the debts included.

What debts aren’t included in a DRO?

Some types of debt won’t be written off by a DRO and you have to keep paying them.

The following ‘excluded’ debts don’t count towards the permitted limit:

  • Criminal fines
  • Student loans
  • Child Maintenance Service arrears (or CSA)
  • TV licence arrears
  • Social Fund loans
  • Damages for personal injury ordered by a court

Fraudulent debts are treated differently. They won’t be written off at the end of the DRO, but they do count towards the maximum debt limit.

Is a DRO right for you?

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Hire purchase (HP) items and DROs

Hire purchase or conditional sale items are not legally yours until you pay for them in full. If you’re starting a DRO, you may have to return the item, or transfer ownership to someone else who can make the payments for you.

In some cases you may be able to continue paying a hire purchase agreement and keep the goods. This will only be possible if:

  • The goods are ‘essential’, for example household appliances you couldn’t do without
  • The value of the goods is below the DRO assets limit of £1000 for England or Wales residents, or £300 for Northern Ireland residents (or £1,000 for a vehicle)
  • The payments are up to date and you have no arrears

Are loans from family and friends included in a DRO?

Loans from friends or family must be included in a DRO just like other debts.

This means the person who lent you the money can’t take any action to collect it from you, and you can’t make payments to them after the DRO starts.

If they’re happy to treat the loan as a gift, you can go ahead with the DRO. Alternatively, for small sums, you may be able to come an agreement to pay it off in kind – for example, instead of paying them back in cash could you do some chores like gardening or babysitting for them instead.

If you owe money to a friend or family, don’t be tempted to pay it off quickly before your DRO starts. This could be seen as showing them preferential treatment, and your DRO could be refused as a result.

Free debt advice

If you’re considering a debt relief order, we can help you through the whole process.

Use our online debt advice tool Debt Remedy, which will suggest the best debt solution. Alternatively you can ring our debt Helpline (free from all landlines and mobiles).