If you have small debts and very little spare income, a Debt Relief Order could write them off after 12 months. Here is how eligibility, applications and restrictions work.
Need to know
- A Debt Relief Order is a formal insolvency option in England and Wales for people with qualifying debts of no more than £50,000 and usually less than £75 a month spare income.
- You cannot apply on your own; an approved debt adviser checks your eligibility and submits the application, and since April 2024 there is no fee.
- Listed debts are frozen for 12 months and written off if your circumstances have not improved by the end.
- The order stays on your credit file for 6 years, and restrictions on borrowing, running a business and opening bank accounts apply during the year.
- Student loans, magistrates court fines and child support payments are never covered and must still be paid.
When debts pile up faster than you can pay them, and there is very little money left at the end of each month, a Debt Relief Order (DRO) is one of the formal options open to people in England and Wales. It is built for a specific situation: modest debts, few belongings of value and almost no spare income. This guide explains who qualifies, how the application works, what the 12-month period involves and what the order means for your credit file and your home.
What a Debt Relief Order Is and Who It Suits
A DRO is a form of personal insolvency, which means it is a legally binding process with rules and restrictions set out in law. It suits people who cannot pay their debts and are unlikely to be able to in the foreseeable future.
Once a DRO is in place, you no longer pay the debts listed in it, and the interest on those debts stops building too. This 12-month period is called the moratorium. If your circumstances have not improved by the end of it, the listed debts are written off and you do not have to pay them.
A DRO is generally for people who rent their home or live with family, have few assets and little disposable income. It is not open to people living in Scotland or Northern Ireland, which have their own debt solutions; a debt adviser can explain the options there.
The Eligibility Rules: Debt, Assets and Surplus Income
You cannot decide for yourself whether you qualify. An approved debt adviser checks your situation against set criteria. Broadly, you should be eligible if all of the following apply:
- Your qualifying debts total no more than £50,000. This limit was raised from £30,000 on 28 June 2024.
- You have spare income of less than £75 a month after paying household bills.
- Your belongings are worth no more than £2,000 in total, not counting a vehicle.
- Any vehicle you own is worth less than £4,000. This limit rose from £2,000 in June 2024.
- You are not already involved in another formal insolvency procedure, for example bankruptcy or an individual voluntary arrangement (IVA).
- At least 6 years have passed since your last DRO, if you have had one.
- You do not own your home, because a home counts as an asset.
Income from certain disability benefits does not count against you when eligibility is assessed.
The adviser will also ask about your recent financial behaviour. You must declare whether, in the last 2 years, you have done things such as paying one creditor while not paying others, for example settling a debt to a relative. Behaviour such as fraud, gambling or giving away property can affect whether your application is accepted.
How to Apply and Who Can Help You
A DRO application is not something you can do yourself. Applications go through an approved debt adviser, sometimes called an intermediary, who works with the official receiver, the officer of the court who handles insolvency cases. The adviser’s help is free, and so is the application itself. Until 6 April 2024 there was a £90 fee, which the government abolished because it was deterring some people who needed the order most.
The adviser will go through your circumstances confidentially, help you work out what you owe and what you spend, and calculate your total debts, the value of your possessions and your monthly surplus. If a DRO looks suitable, they complete an online application and submit it to the Insolvency Service. You do not need to go to court. If a DRO is not suitable, the adviser will talk you through other ways of dealing with your debts.
MoneyHelper has information about organisations that offer free debt advice, including those who can make DRO applications.
What Happens During the Moratorium Period
Once the order is approved, creditors listed in it cannot ask you for payments or take further action against you, and interest stops building. That pause is the main immediate benefit.
In return, you must follow restrictions for the full 12 months. You must not:
- borrow more than £500 unless you first tell the lender about your DRO
- run a business unless the people you deal with know about it
- open a new bank account unless you inform the bank or building society first
Breaking these restrictions can lead to prosecution, and the order can have its length extended when the restrictions are breached. If your financial circumstances improve during the year, for example through a rise in income or assets, the DRO may be cancelled and you would owe the debts again. If you want to remain a director of a limited company, you must apply for permission first.
Important
If you leave a debt out of your DRO application, you cannot add it later. The adviser will help you list everything, so gather statements and letters before your appointment.
Which Debts Are Not Covered
Debts that are allowed into a DRO are known as qualifying debts. Most everyday unsecured debts qualify, including arrears on rent, gas and electricity bills, phone bills, council tax and income tax, money owed to friends and family, and money owed to HM Revenue and Customs. Debts obtained by fraud are treated differently: you will still owe them once the DRO ends.
Some debts are never covered, and you will keep paying them regardless:
- student loans
- fines from magistrates courts, and confiscation orders linked to criminal activity
- maintenance and child support payments
- penalties for fraud
These excluded debts do not count towards the £50,000 limit.
Rent arrears need particular care. Even if the arrears are included in your DRO, your landlord can still take steps to evict you, so you may need to keep paying something towards them. Some tenancy agreements contain an insolvency clause, which means taking out a DRO could breach the agreement. If you have rent arrears, get specialist advice before applying.
How a DRO Affects Your Credit File and Home
A DRO appears on your credit reference file for 6 years, counted from the day it was approved, the same length of time as other debt relief options. During that period, borrowing will be harder and more expensive, because lenders can see the order when they check your file. Your name is also added to the Individual Insolvency Register, a public record, and the entry is removed 3 months after the DRO ends.
The effect on your home depends on your housing situation. Homeowners cannot get a DRO at all, because a property counts as an asset. For tenants, the order itself does not end a tenancy, but rent arrears carry the eviction risk described above.
If your debts grew from borrowing that keeps getting extended rather than repaid, such as rollovers and extensions on payday loans, a DRO adviser can look at the full picture. And if a lender is taking payments directly from your card without your agreement, our guide to continuous payment authority explains how those payments work and how to stop them.
What Happens When the Order Ends
After 12 months, if your circumstances have not changed, the qualifying debts listed in the order are written off. You stop following the restrictions, and you are no longer liable for those debts or the interest attached to them. The entry on your credit file remains until the 6 years are up, so expect borrowing to stay difficult for a while after the order itself has finished.
A DRO is not a step to take lightly, and it is not the only route. If you are on benefits and your problem is a gap in essentials rather than a pile of unpayable debts, something like a Budgeting Loan or Advance may be more appropriate. If you are being chased for a payday loan you cannot afford to repay, read our guide to struggling to repay a payday loan before deciding anything.
The sensible first step is the same in every case: use MoneyHelper to find a free, approved debt adviser, and let them assess whether a DRO is right for you.
Your questions answered
Q: Can I apply for a Debt Relief Order myself?
A: No. Applications must go through an approved debt adviser, who checks your eligibility and submits an online application to the Insolvency Service on your behalf.
Q: How much does a Debt Relief Order cost?
A: Nothing. The £90 fee was abolished from 6 April 2024, and the debt adviser’s help is free of charge as well.
Q: What happens if my finances improve during the 12 months?
A: The order can be cancelled if your financial circumstances change, for example through a rise in income or assets, and you would owe the debts again.
Q: Will a Debt Relief Order stop my landlord evicting me?
A: No. Even if rent arrears are included in the order, your landlord can still take action to evict you, so specialist advice is essential if you have arrears.
This guide is general information, not financial advice. Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We don’t arrange loans or work with lenders. Before borrowing, check the lender is authorised on the FCA register, and consider free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice.