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What Is a Debt Relief Order? A Complete Guide

Written by Jessica on . Posted in News.

What Is a Debt Relief Order?

A Debt Relief Order (DRO) is a formal debt solution for people in England and Wales who have low income, minimal assets, and debts they cannot realistically repay. Once approved, your debts are frozen for 12 months. If your financial situation has not improved by the end of that period, all debts included in the DRO are written off completely.

A DRO is a form of insolvency, introduced under the Insolvency Act 1986 and reformed significantly in 2009 when DROs were first made available. Further changes were made in June 2024, which raised the eligibility thresholds considerably — making DROs accessible to a much larger number of people.

Who Can Apply for a Debt Relief Order?

To qualify for a DRO, you must meet all of the following criteria at the time of application. These are the current rules as of June 2024:

Debt Level

Your total unsecured debts must not exceed £50,000. This includes credit cards, personal loans, overdrafts, utility arrears, council tax arrears, and other unsecured debts. Secured debts such as a mortgage are not included in this calculation, but you cannot be a homeowner (see below).

Spare Income

After paying your essential household costs — rent, food, utilities, transport to work — your remaining disposable income must be less than £75 per month. If you have more than £75 left over each month, you will not qualify. This threshold reflects that if you have meaningful surplus income, you should be making payments towards your debts rather than having them written off.

Assets

The total value of everything you own must be less than £2,000. This includes savings, valuables, equipment, and any other property — but does not include basic household goods, tools you need for work, or your vehicle (subject to the vehicle limit below).

Vehicle

You must not own a vehicle worth £4,000 or more. You are allowed to own one vehicle below this value — particularly if you need it for work or essential travel. If your vehicle is worth £4,000 or more, you will not meet this criterion unless you can demonstrate it is exempt (for example, a vehicle that has been adapted for a disability).

Home Ownership

You cannot own your home. This applies to any share of a property — freehold, leasehold, or part-ownership. If you are a homeowner, a DRO is not available to you. You would need to explore other options such as an IVA or bankruptcy.

Previous DRO

You must not have had a DRO within the last six years. If you have had a DRO in the previous six years, you cannot apply for another one regardless of your current circumstances.

Other Insolvency

You must not currently be subject to a bankruptcy order, an IVA, or any other formal insolvency procedure. You also must not have a current interim order.

Residency

You must be living in England or Wales, or have lived or carried on business there within the last three years. Scotland has its own debt solutions — a DRO does not apply there.

What Debts Are Included in a DRO?

The following types of unsecured debt can typically be included:

  • Credit cards and store cards
  • Personal loans and payday loans
  • Bank overdrafts
  • Catalogue and mail order debt
  • Utility arrears (gas, electricity, water)
  • Council tax arrears
  • Income tax and National Insurance arrears (in some cases)
  • Benefit overpayments (in some cases)
  • Rent arrears

The following debts cannot be included in a DRO and will not be written off:

  • Student loans
  • Child support and maintenance arrears
  • Criminal fines and court fines
  • Confiscation orders
  • Debts incurred through fraud
  • Social Fund loans
  • Secured debts (mortgage, secured loans)
  • Personal injury compensation claims against you

Any debt that cannot be included remains your responsibility and you will still need to deal with it separately.

How Does the DRO Process Work?

Unlike bankruptcy, you cannot apply for a DRO directly through the government. The application must be submitted by an approved intermediary — a debt adviser who is authorised by a competent authority to submit DRO applications to the Insolvency Service.

The process typically works as follows:

  1. Seek free debt advice. Contact a free debt advice organisation such as StepChange, National Debtline, or Citizens Advice. A debt adviser will assess your circumstances and confirm whether a DRO is appropriate for you.
  2. Gather your financial information. You will need to provide a full list of your debts, your income, your outgoings, and a list of your assets. Your adviser will help you prepare this.
  3. Application submitted. Your approved intermediary submits the DRO application to the Insolvency Service’s Adjudicator. There is no application fee.
  4. DRO approved. If approved, the DRO is registered on the Individual Insolvency Register and the 12-month moratorium period begins immediately.
  5. 12-month moratorium. During this period, creditors included in the DRO cannot contact you, take enforcement action, or pursue the debts.
  6. End of the DRO. If your circumstances have not improved — specifically, if you have not acquired assets above the threshold or received income above the limit — all included debts are written off automatically. No further action is needed.

What Happens During the 12-Month Moratorium?

Once your DRO is approved, the moratorium period provides immediate relief from creditor pressure. However, there are restrictions you must follow:

  • You cannot borrow £500 or more without telling the lender that you are subject to a DRO
  • You cannot act as a company director or be involved in forming or managing a company without the court’s permission
  • You must declare any improvement in your financial circumstances — including receiving a windfall, inheritance, or increase in income — to the Insolvency Service
  • If your circumstances improve significantly during the moratorium, the DRO may be revoked and your debts reinstated

You must cooperate fully and honestly throughout the process. Providing false information, hiding assets, or concealing income is a criminal offence.

What If My Circumstances Improve During the DRO?

A DRO can be revoked if your circumstances change materially during the 12-month period. For example:

  • You receive an inheritance or windfall that brings your assets above £2,000
  • Your income increases significantly above the £75 per month surplus threshold
  • You acquire a vehicle worth £4,000 or more
  • Information comes to light that you provided false or misleading details on your application

This is why it is essential to declare any changes to the Insolvency Service as soon as they occur. Failure to do so can result in a Debt Relief Restrictions Order (DRRO), which extends the restrictions of the DRO for up to 15 years and can result in criminal prosecution in serious cases.

Impact on Your Credit File

A DRO will appear on your credit file for six years from the date it is approved. During this time, obtaining credit, a mortgage, or certain financial products will be very difficult. Most mainstream lenders will decline applications from people with a DRO on their file.

Your DRO is also recorded on the Individual Insolvency Register, which is publicly searchable at gov.uk. It is removed from the register three months after the DRO ends — so usually 15 months after it started.

Impact on Employment

Most employment is not affected by a DRO. However, some roles do carry restrictions:

  • You cannot act as a company director or be involved in company management without court permission
  • Some financial services roles and licences may be affected — check with your employer or regulatory body
  • If you work in a role that requires security clearance or specific financial probity, speak to your employer before proceeding
  • Local authority elected members and some public office holders may be affected

DRO vs Other Debt Solutions

A DRO is one of several options available to people with unmanageable debt. Whether it is the right choice depends on your individual circumstances.

  • DRO vs IVA: An IVA requires regular income and monthly contributions over five to six years. It covers higher levels of debt and is available to homeowners. If your debts are over £50,000 or you own your home, an IVA may be more appropriate. However, if you qualify for a DRO, it is generally quicker, free, and less demanding.
  • DRO vs Bankruptcy: Bankruptcy costs £680 to apply for, lasts 12 months, and puts your assets — including home equity — at immediate risk. A DRO is free, also lasts 12 months, but has strict eligibility thresholds. Bankruptcy may be the only option if your debts exceed £50,000 or you own a home.
  • DRO vs DMP: A Debt Management Plan is informal, does not write off any debt, and is not legally binding. If you can afford to repay your debts in full over time — even slowly — a DMP may be more appropriate. A DRO is for people who genuinely cannot repay their debts even with reduced payments.
  • DRO vs Breathing Space: Breathing Space is a temporary protection — up to 60 days — that gives you time to seek advice and make a decision. It is not a solution in itself. A DRO may be the solution you enter after using Breathing Space to take stock of your options.

Is a DRO Right for You?

A DRO may be the right option if:

  • Your total unsecured debt is £50,000 or less
  • You have less than £75 per month spare after essential costs
  • You do not own your home
  • Your total assets are worth less than £2,000
  • You do not own a vehicle worth £4,000 or more
  • You have not had a DRO in the last six years
  • You live or work in England or Wales
  • You genuinely cannot repay your debts and there is no realistic prospect of your situation improving

If you meet all of these criteria, a DRO could provide a clean break from debt within 12 months, at no cost to you.

Getting Advice

You can also submit your details here and a regulated adviser will be in touch to discuss whether a DRO or another debt solution is right for your situation.

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.