Getting a Debt Relief Order (DRO) is a way to clear some of your debts. They are a legally binding agreement that requires you to pay off your debts over a fixed period. They are designed to be affordable for people with low incomes and small debts. However, they can still be an expensive solution.
Before you apply for a DRO, you will need to decide if you can comply with the restrictions. You should also check whether your situation will change in the future. You may need to send an official document to your credit reference agencies. You will have to tell your bank about any overdraft or any overdraft that was opened for you before the DRO was issued.
Usually, a DRO is for one year, but you may be allowed to extend it for another two to 15 years. A DRO will be listed for six years on your credit reference file. This will mean that creditors will be able to contact you and attempt to recover debts. If you do not pay back your debts, you can be prosecuted for breaking the restrictions.
If you are considering applying for a DRO, you should speak to a debt expert to find out if you qualify. These experts will offer you advice on the process and how to apply. You can also seek help from charities that provide grants to people who need to apply for a DRO.
Normally, a DRO is only suitable for people with low debts. You can only apply for a DRO if you have lived in England and Wales for the past three years. You can’t apply for a DRO if you were declared bankrupt within the last six years. The court officer will be able to decide if your application is accepted or rejected.
The Official Receiver is the government body that handles DRO applications. When you submit your DRO application, the Official Receiver will notify your creditors. Those creditors can object to being included in the DRO. If your application is rejected, the official receiver will explain why and ask you to agree to a debt relief restrictions undertaking. If you agree, your debts will be written off after the agreed period.
A debt relief order can have a significant impact on your life. You are not able to write cheques that might bounce, and you will not be able to act as director of a company. You may be required to transfer the ownership of your car to someone who will be able to afford the payments. You can’t get any credit over PS500 without disclosing that you are a DRO applicant. You can’t make any promotional claims about yourself or your business. You can’t start your own company or promote any businesses that you have previously run.
The Official Receiver will also keep a record of all your debts and assets. If you have a vehicle worth more than PS2,000, your vehicle will be included in your list of assets. You can exclude cars that are adapted, but you cannot exclude a car that is used for work.