If an individual has gross assets of less than £1,000 (plus a vehicle worth not more than £1,000), surplus income of £50 or less after paying essential personal and household spending, and debts of £20,000 or less then they can apply to the Official Receiver (a civil servant and officer of the Court) for a DRO.

A DRO will last for 1 year, and once it has ended the individual is, with certain exceptions, released from their debts. Those exceptions are student loans, fines, debts arising from family proceedings and Department of work and Pensions (DWP) budgeting and crisis loans.

Advantages

  • A low cost alternative to bankruptcy.
  • After twelve months, all of the debts listed on the order will be written off.
  • You do not have to go to court.
  • You’re protected from enforcement action by your creditors.

Disadvantages

  • As with Bankruptcy and IVAs, DROs are listed on the individuals credit record for a period of 6 years. This may have implications when applying for credit in the future.
  • A DRO is also listed on the Insolvency Register, which is publically available and will usually remain there for a period of 15 months (3 months in addition to the normal 12 month DRO period).
  • Whilst in a DRO, the individual may not obtain credit of more than £500 without explaining their situation to the lender.
  • Whilst an individual is subject to a DRO, they are unable to trade or conduct business without telling those you do business with about your DRO. It is also not possible during the period of a DRO to become a Company director, nor form or be involved with the formation and management of a limited company without the permission of the Court.

Contact us

Specific advice should be obtained before taking action, or refraining from taking action, on any of the issues covered above.

For further information, please contact one of our Client Services Team who will be able to assist you.