What are Debt Relief Orders?

Under the Tribunals, Courts and Enforcement Act 2007, you can make application for a Debt Relief Order through the Insolvency Service if you have debts lower than £15,000, and you are on low income.

This type of Order is an alternative to going bankrupt (bankruptcy could be a more costly option), and it means that for 12 months, creditors named within the Order will not be able to take action against you for the debts.

After the initial 12 months you will be released from the debts, however; this will remain on your credit file for 6 years, and you may find that you are not able to obtain credit for 15 years thereafter (especially if you have a Debt Relief Restriction Order in place).

Who’s Eligible?

There is a strict eligibility criteria which needs to be adhered to if you are considering a Debt Relief Order:

You are ‘completely’ unable to pay your debts.

You owe a maximum of up to £15,000 (including business debts, statute barred debts, benefit over-payments, social fund loans and hire purchase agreements).

*PLEASE NOTE: councils can still make deductions to benefits to recover over-payments during the Debt Relief Order period

Your gross assets do not exceed £300, including ‘paid off’ hire purchase agreements.

Your monthly disposable income is £50 or less (minus tax, national insurance, and normal household expenses).

You should not own a vehicle which is worth more than £1,000.

You must be domiciled in the England or Wales or, at anytime within the last 3 years; you should have been resident or carrying out business within England or Wales.

You ‘must not’ have had an initial Debt Relief Order within the last 6 years.

You ‘must not’ be involved in any other insolvency procedure, eg. bankruptcy. (If a creditor is petitioning for bankruptcy at the same time, you will require their permission before you proceed with the Debt Relief Order).

You ‘must not’ have given away or sold property within the last 2 years.

If there has been a preference towards certain creditors over others in the last 2 years, you will not be granted a Debt Relief Order.

If an applicant has a ‘private pension fund’ which is many years away from retirement, it must be satisfied that the future pension fund does not exceed £300.

Your partner’s income and benefits will be taken into consideration when applying for a Debt Relief Order, as you will need to show how much your spouse or partner contributes to the household expenses.

What information will I need when I apply?

You will require certain documentation and compliance to apply for this type of Order:

A full list of your assets and liabilities, including names of all your creditors.

Be prepared to co-operate fully with the Insolvency Advisor, and provide detailed financial analysis.

Be prepared not to receive credit of more than £500 from anyone (even family), without referring to the Insolvency Advisor first.

You should not to make any payments towards creditors you have listed in the Debt Relief Order.

You will not be granted a Debt Relief Order if you have left out certain information within the initial application.

You maybe charged with a criminal offence, if the Insolvency Advisor believes that you left out information of a serious nature.

All income, including benefits such as council tax benefit etc, should provided.

What if my circumstances change?

Normally, a Debt Relief Order will last for a maximum of 12 months however, if within that time your circumstances change enough for you to make payment to your creditors, the Receiver can extend the 12 month period to an extra 3 (15 months in total), for you to enter into payment arrangements with your creditors. In the meantime, you will not be harassed by any creditor for the 15 month period.

What happens to joint debts?

The full amount of joint debts will be included in the Debt Relief Order, however only the party who is applying for the Order will be protected. The joint partner will still be liable for such debt.

What happens if I’m granted a Debt Relief Order?

All your creditors are notified.

You should not be harassed by your creditors during the 12 month (or 15 month), Debt Relief Order period.

You will still however ‘remain liable’ for other debts, such as – Court Fines, Orders in Family Court proceedings, maintenance assessment payments.

You remain liable for student loan payments.

Obligations arising under s.1 Drug Trafficking Offence Act 1986; s.1 Criminal Justice Act (Scotland) 1987; s.71 the Criminal Justice Act 1988; Parts 2, 3 or 4 of the Proceeds of Crime Act 2002 will still remain in force.

Payments of Damages for negligence, nuisance, or breach of statutory duty, or Damage payments made under Part 1 of the Consumer Protection Act 1987, should still be paid.

Secured Debts are not part of the Debt Relief Order, and payments to these creditors should be maintained.

You need to continue making payments for rent, council tax and utility bills.

I’m granted the Order, what restrictions does it place on me?

If you wish to apply for more than £500 credit during the Debt Relief Order period, (alone or jointly); you must tell the Credit Lender that you are subject to the Debt Relief Order. This includes if you request goods without credit, and fail to pay for them when they arrive.

You must tell all business associates of the Order, if you carry on business in a name ‘other’ than what you have referred to in the Debt Relief Order.

You ‘must not’ be involved in promoting, managing or forming a Limited Company without the Court’s permission.

You may not be granted bank or building society accounts with the Order in place.

If you are granted a bank account, you are not able to apply for overdraft facilities until you notify your bank of the Order in place.

Debt Relief Restrictions Order

If during the initial application process the Receiver believes that you have either been dishonest during the application, or you are to blame for your debt; they may apply to the Court for a Debt Relief Restrictions Order, lasting between 2 to 15 years.

The restrictions for this type of Order is the same as for the Debt Relief Order, but can last for up to 15 years on your credit file, (not the initial 6 years). This means that credit restrictions will remain in place for up to 15 years.

How much is a Debt Relief Order, and how do I apply?

A Debt Relief Order costs £90, which is non-refundable, whether the Receiver accepts or rejects your application. The £90 needs to be submitted in cash. You can apply for the Order online, via an approved intermediary (addresses below).

After submitting the application online, you must also print a copy, sign and send it to:

The Debt Relief Order Unit
The Insolvency Service
1st Floor, Cobourg House
Mayflower Street
Plymouth
PL1 1DJ

Who should I attend directly, for submission of my application?

Citizens Advice
Myddelton House
115 -123 Pentonville Road
London
N1 9LZ
Telephone: 0207 833 2181
Contact: Lisa Colclough
Email: DRO@citizensadvice.org.uk

Consumer Credit Counselling Service
Wade House
Merrion Centre
Leeds
LS2 8NG
Telephone: 0800 138 1111 (Mon – Fri 8am – 8pm)
Contact: Martin Swift
Email: droteam@cccs.co.uk

Baines & Ernst Ltd
Baines and Ernst Ltd
Lloyds House
18 -22 Lloyd Street
Manchester
M2 5BE
Telephone – 0845 307 5888
Contact – Lyndsey O’Neil (Insolvency Support Manager)
Email – dro@bainesandernst.com

The Institute of Money Advisers
4 Park Court
Park Cross Street
Leeds
LS1 2QH
Telephone: 0113 242 0048
Contact: Katherine Hougham
Email: katherine.hougham@i-m-a.org.uk

National Debtline
Tricorn House,
51-53 Hagley Road,
Edgbaston,
Birmingham
B16 8TP
Telephone: 0121 410 6247
Contact: Michelle Edwards (Contact Centre Manager)
Email: michellee@nationaldebtline.co.uk

Totemic Ltd trading as Payplan
Payplan Ltd.
Kempton House
Dysart Road
Grantham
Lincolnshire
NG31 7LE
Telephone: 0800 716 239 (Mon – Fri 8am – 9pm / Sat 9am – 3pm)
Contact: Juliana Mclean
Email: dro.info@payplan.com

Insolvency Practitioners Association
Valiant House
4-10 Heneage Lane
London
EC3A 5DQ
Telephone: 020 7623 5108
Contact: Andrew Kerr
Email: andrewk@ipa.uk.com

Advice UK
6th Floor
63 St Mary Axe
London
EC3A 8AA
Telephone: 020 7469 5700
Contact: David Hawkes

Shelter
Aegon House
30 Poole Hill
Bournemouth
Dorset
BH2 5PS
Telephone: 0300 330 0516
Contact: Shelter Helpline

Christians Against Poverty
Jubilee Mill,
North Street,
Bradford
BD1 4EW
Telephone: 0800 3280006
Contact: New Client Enquiries

Think Money
Pennington House
Carolina Way
South Langworthy Road
Salford Quays
M50 2ZY
Telephone: 0800 027 5930
Contact: Melanie Taylor
Email: DRO@thinkmoney.com