Serious debt: Your options explained

A debt relief order (DRO) is a formal insolvency procedure aimed at people who cannot pay their debts. They were set up in 2009 in the wake of the financial crisis, as a way of making insolvency available to those who simply could not afford, or could not access, the process of going through formal bankruptcy. The application fee for a DRO costs £90 for example, compared with the initial costs of £680 when going down the formal bankruptcy route.

It’s available to those with a low, or zero income and few assets, who don’t have any other way of paying back what they owe and who don’t own their own home. To qualify, your debts must be less than £20,000. You’ll need to have no more than £50 left each month after you’ve covered your usual household expenses, and if you own a car it can’t be worth more than £1,000, unless it’s been adapted because you have a disability. Any savings you have or things of value you own must be worth no more than £1,000.

You’ll need to talk to a DRO advisor, which is usually free to do, before you apply for an order. You can find an advisor at your local Citizens Advice. You can also find one through other organisations – you’ll find a list of approved organisations here.

If your advisor agrees that a DRO is the right option for you, you must then complete an application which will be submitted to the official receiver. This is when the £90 fee to make a DRO application must be paid. If you need help with the cost of DRO fees, help may be available to you from some charities, provided you meet their eligibility criteria.To find out what help may be available from charitable funds, you can use the Turn2us Grants Search tool.

If your application for a DRO is accepted, you won’t have to make any further payments towards most types of debts. Debts covered by a DRO include credit cards, loans and overdrafts, rent arrears, utility bills, telephone bills, income tax and Council Tax and debts you owe to friends or family. Student loans, child support and court fines aren’t covered.

The debt relief order will typically last for a year, unless your financial situation improves. If your finances have not improved during those 12 months, any outstanding debts will usually be written off.

Author: wpadmin

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