Debt Relief Orders

A Debt Relief Order (DRO) is a formal debt solution, a legally binding process with rules and restrictions which can help people make a fresh start. DROs came into force on 6 April 2009, introduced under the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007). Applying for a DRO is an administrative rather than court-based procedure; they are made by Official Receivers working in partnership with the professional debt advice sector.

The aim of a DRO is to provide a low-cost debt remedy aimed at the financially excluded who have relatively low levels of debt, little surplus income and few assets. They offer a workable debt relief remedy for those who cannot take advantage of other debt remedies (such as Individual Voluntary Arrangements (IVAs)) and where bankruptcy would be disproportionate. DROs are intended to provide a fresh start for vulnerable people trapped in debt.

To obtain a DRO, the debtor must satisfy strict eligibility criteria. A DRO will freeze debt repayments and interest for 12 months. During this time creditors cannot take debt recovery action without the court’s permission (there is a strict moratorium). At the end of the year, the debtor will be free of all the debts included in the order provided their circumstances have not changed. In effect, the debts are written-off, the debtor will not have to pay them.

DROs are available in England, Wales, and Northern Ireland. In Scotland, a “Minimal Assets Process (MAP) bankruptcy” offers a similar debt solution to a DRO, but has different benefits, risks and fees associated with it. It should be noted that individual insolvency in Northern Ireland is governed by separate, but broadly similar, legislation to England and Wales. Scotland has its own sequestration regime.

This paper summarises the main features of DROs as they operate in England and Wales, with emphasis on their eligibility criteria.