News update: Changes to Debt Relief Orders (DRO) that you may need to be aware of

The Insolvency Service announced that new limits are in place for Debt Relief Orders (DRO) from 29th June 2021. This is good news for those that qualify and it is expected that over 13,000 more people will have that option available to them. So what do you need to be made aware of?

What is a Debt Relief Order?

A Debt Relief Order – also referred to as a DRO – is a formal debt solution designed for people with little or no assets and low income. If you don’t own your own home and have little spare income and debts below a certain level, then a DRO could be a way to deal with your debts. It is an alternative debt solution to Bankruptcy or an Individual Voluntary Arrangement and available to residents of England, Wales and Northern Ireland.

What are the new limits for a DRO?

• The surplus income level (what is left after paying your bill and everyday expenses) has increased from £50 to £75 per month
• Total debt allowable increases from £20,000 to £30,000
• General asset amount has increased from £1,000 to £2,000
• The value of a car has increased from £1,000 to £2,000 and is treated as separate to general assets

If you want to read more about the consultation responses, the Insolvency Service has published them here.

Benefits of a DRO

• Typically a Debt Relief Order lasts twelve months
• Debt Relief Orders don’t require you to make payments into them
• Creditors are stopped from taking any further action against you
• There is a small fee of £90 for starting a Debt Relief Order that can be paid in instalments
• A Debt Relief Order is relatively simple process to start and can be done through various charity organisations

Considerations of a DRO

• Your credit rating will be affected for six years
• Owning your own property or having assets over £2,000 will stop you entering into a Debt Relief Order
• A Debt Relief Order may be cancelled if you do not comply or if your circumstances change during the the 12 month period, for example if you’re able to make payments towards your debt(s)
• Entering into a DRO will be recorded on a public register
• If you can afford more than £75 after your monthly essentials have been budgeted for then you will not qualify

What else is available?

If you discover that you are not eligible for a DRO then there may be other options available to you in the form of debt management, bankruptcy and IVA.

You can read more about each option on our debt solutions page here. 

At UKDS, we specialise in providing IVA’s after thoroughly checking if you qualify for one. Our expert advisers can help you through the process. Check if you qualify for an IVA by visiting this link.