A Debt Relief Order, sometimes known as a mini-bankruptcy, has recently been introduced as a debt solution for individuals whose debts are under £15,000.
A DRO is intended to help debtors who have little or no assets, and who have very little disposable income at the end of each month and therefore cannot afford to make themselves bankrupt. A Debt Relief Order acts in much the same way as a bankruptcy in that you will be released from the debt you owe, once the Debt Relief Order period is over.
Is a Debt Relief Order right for me?
A DRO may be the appropriate solution for you if you owe less than £15,000 in unsecured debt, and you don’t own any property or have assets totalling more than £300. To be eligible for a DRO, you must be able to prove that you are left with less than £50 of disposable income each month. *
*Disposable income is defined as the amount you have remaining each month after your normal household expenses have been paid.
Advantages
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- Legally releases you from your debt to creditors
- Inexpensive fees (currently (£90)
- A DRO typically lasts for 12 months, meaning the process is completed sooner than an IVA would be
Disadvantages
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- A DRO is a serious and legally binding undertaking
- As with bankruptcy, a DRO may seriously affect your ability to obtain credit in the future
- As with bankruptcy, not all debts are covered by the DRO. For example, court fines, child maintenance payments and student loans cannot be included in a DRO
- If your circumstances change while you are subject to a DRO, you may still have to repay your creditors.
How much will I have to repay?
Most people who are subject to a debt relief order do not repay any more of their debt.
