Debt Relief Order

  • A Debt Relief Order (DRO), sometimes known as a mini-bankruptcy, has been introduced as a way of individuals dealing with their debts if they can’t afford to pay them. A DRO may be appropriate for you if you owe £20,000 or less in unsecured debt, and you don’t own any property or have assets totalling no more than £1,000.
  • A DRO is intended to help debtors who not only have little or no assets, but also those who have very little disposable income at the end of each month and therefore cannot afford to make themselves bankrupt.   A DRO acts in much the same way as a bankruptcy in that you will be released from the debt you owe, once the DRO period is over.
  • To be eligible for a DRO, you must be able to prove that you are left with less than £50 of disposable income each month. Disposable income is defined as the amount you have remaining each month after your normal household expenses have been paid.
  • It legally releases you from your debt to creditors, but a DRO is a serious and legally binding undertaking.
  • As with bankruptcy, a DRO may seriously affect your ability to obtain credit in the future.
  • A DRO typically lasts for 12 months, meaning the process is completed sooner than an IVA would be. As with bankruptcy, not all debts are covered by the DRO.  For example, court fines, child maintenance payments and student loans cannot be included in a DRO.
  • If your circumstances should change during your DRO, you may still have to repay your creditors.
  • Most people who are subject to a DRO do not repay any more of their debt.
  • If you’re struggling with your debt and are considering a DRO, call MGA for your free no-obligation advice.

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