Introduction
Are you feeling overwhelmed by debt and unsure of your options? A Debt Relief Order (DRO) could be the answer you’ve been looking for. This guide will help you understand what a DRO is, who is eligible, and how it can assist you in managing your financial burdens. With the upcoming changes set to increase the qualifying limits, now is a great time to explore this option. If you need further assistance, there are various resources available to help you navigate your financial challenges.
If you’re struggling with debt and feel overwhelmed, a Debt Relief Order (DRO) might be the solution you need. This helpful financial tool allows individuals to manage their debts more effectively, especially if you’re facing financial difficulties. Here’s what you need to know about DROs, including the upcoming changes that could benefit you.
What is a Debt Relief Order (DRO)?
A Debt Relief Order is a legal way to help you deal with your debts if you meet certain criteria. It’s designed for people who:
- Owe £30,000 or less in total debts (this limit will increase to £50,000 starting June 28, 2024)
- Do not own a home
- Have limited assets (things of value) worth no more than £2,000
- Have very little spare income left after paying for essential living costs
With a DRO, you typically won’t have to make payments towards most of your debts, and creditors cannot demand repayment during the DRO period, which usually lasts for one year. After this period, most of your debts will be wiped clean.
Am I Eligible for a DRO?
To qualify for a DRO, you should meet the following conditions:
- You can’t pay your debts.
- Your debts are within the qualifying limits (up to £30,000, or £50,000 after June 28, 2024).
- You have no more than £75 left each month after covering your basic living expenses.
- You don’t own your home.
- Your total assets are worth £2,000 or less (some items, like basic household goods, may not count).
- You haven’t had a DRO in the last six years (unless it was revoked).
- You haven’t declared bankruptcy or entered into another formal insolvency process.
- You’ve lived, worked, or owned property in England or Wales in the past three years.
From June 28, 2024, if you own a vehicle valued at less than £4,000, you won’t need to include it in your assets. This can provide additional flexibility for those considering a DRO.
What Debts Can a DRO Cover?
A DRO can cover a variety of debts, known as “qualifying debts.” These include:
- Credit cards, personal loans, and overdrafts
- Rent and utility bill arrears
- Tax debts and benefits overpayments
- Hire purchase agreements and buy now, pay later debts
- Debts to friends and family
However, it’s important to note that some debts are not covered by a DRO. You will still need to pay:
- Court fines and criminal-related debts
- Child support and maintenance
- Student loans
- Compensation for injury or death
If you’re unsure whether a specific debt qualifies, consult with your DRO adviser.
The Impact of a DRO
While a DRO can provide relief from debt, it’s crucial to understand its potential effects on your life:
- A DRO will remain on your credit record for six years, which may affect your ability to obtain credit in the future.
- If you have goods on hire purchase, you may need to return them.
- Your bank may close your account, requiring you to open a new one.
- It can impact your tenancy agreement or any power of attorney arrangements you have.
- If you’re applying for British citizenship, a DRO could affect your application.
During the DRO period, you must follow specific rules, such as not borrowing more than £500 without informing the lender about the DRO.
How to Apply for a DRO
If you believe a DRO is right for you, the first step is to speak with a qualified DRO adviser. They will help you complete the application, and their services are typically free. You can find more information about getting a DRO and locating an adviser on the official government website.
Seeking Additional Help
If you’re uncertain whether a DRO is the best option for your situation, there are other resources available to assist you with managing your debts. You can help us persuade the government to give people the debt support they need. Take an anonymous survey to help us learn what people need. It’s always wise to explore all available options before making a decision.
Conclusion
A Debt Relief Order can be a valuable tool for those struggling with debt, offering a fresh start and relief from financial stress. If you think a DRO might be right for you, don’t hesitate to seek advice and take the first steps towards financial recovery. Consider using various legal resources for assistance in navigating your options.
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