A Debt Relief Order is another form of Bankruptcy in which all the debts are frozen for one year and the creditor 'be able to demand any repayment or change your interest rates. By the end of a year, if your circumstances are not improved or you won't be able to repay your debts; then your unsecured debts are written off. It will be considered as the case of insolvency.
Most of the debts can be included under the Debt Relief Order (DRO) as mentioned below:
● Overdrafts
● Credit Card Debt
● Hire Purchase Arrears
● Council Tax Arrears
● Payday Loans
● Benefit Overpayments
● Arrears on utility bills such as Gas, Water or Electricity
Revenue Debts including Overpaid Benefits, Self-Assessment Tax, VAT & PAYE/NIC
● Overdrafts
● HMRC Debt
● Unsecured Loans
● Council / Utility Bills
● Credit / Store Cards
● Vehicle and Property Shortfalls
There are specific debts that can not be covered under DRO and you have to pay these debts on their respective interest rates and charges. These are as follows:
● Court Fines
● Student Loans
● Child Maintenance
● Debts that have been accrued under
● A good alternative to bankruptcy if you have a debt level equivalent or less than £30,000 with little or no savings.
● All the interest rates and charges freeze for 12 months once you qualify for DRO.
● If your circumstances don't change after 12 months; all your debts are written off.
● DRO is specially designed for people who have very few assets or no home so that they are not likely to give up their possessions to repay their debts.
● DRO is one of the formal debt agreements by which your creditors are abode. Therefore you're protected from your creditors and consistent calls.
● DRO draws a negative impact on your credit ratings which remains on your credit file for at least 6 years.
● If your situation improves, DRO may be revoked and you have to resume paying off your debts at reasonable interest rates and charges as finalised by your creditors.
● If you have been involved in any other insolvency plan or DRO within 6 years, you can't apply for another DRO scheme.
What Will You Have To Pay Under DRO?
If you have unsecured debts which are less than £30,000, and the value of your total assets is less than £2,000, you may qualify for DRO. If you qualify for DRO, you have to pay £90.00 as a fee to the insolvency services.