An IVA may not be suitable in all circumstances.
Fees apply to the service, click here for more details. Your credit rating may be affected. Read more about IVAs here.
A Debt Relief Order is a way to write off what you owe providing you have few assets and a relatively small amount of debt. Still, as you may expect, a solution such as this does come with a few caveats. To find out more, read on.
A Debt Relief Order (DRO) should only really be considered if your financial situation will not improve for at least a year. Assuming your position didn’t change over this period, any debts included on the DRO are written off.
While the Debt Relief Order is active, interest rates are frozen and your creditors cannot send demands for repayment. Furthermore, over the year, you won’t pay anything towards your debts.
It’s worth knowing that a DRO will harm your credit score and, for the foreseeable future, you’ll struggle to obtain loans and other financial products.
At Debt Support Centre, we specialise in IVAs and don’t offer Debt Relief Orders. Still, to find out just about everything about this option – as well as how an IVA may be better for you, continue reading.
To qualify for a Debt Relief Order, you’ll need to adhere to the following criteria:
Between 2018 and 2019, more than 27,000 Debt Relief Orders were taken out*. On the other hand, almost 78,000 IVAs were approved.
*According to The Gazette, 'UK individual insolvency statistics for 2019', January 2020.
As well as the qualifying criteria mentioned above, a Debt Relief Order is only suitable for those who cannot realistically pay their debts, aren’t going through another form of insolvency, and reside in England or Wales.
To apply for a Debt Relief Order, it must be obtained from an authorised person - usually an ‘approved intermediary’. They will assist you in making the application and charge £90 for their services.
The Debt Relief Order lasts for 12 months. However, if your financial situation improves during this period, it might be cancelled.
This restriction, as well as other requirements, means that Debt Relief Orders are not a suitable solution in all cases. After all, few can accurately predict what will happen in 12 months. For example, an unexpected windfall or change in job could all lead to the order being terminated.
Although the Debt Relief Order lasts for a year, the process to approve a DRO should take around two weeks. During this time, your application will be assessed and a verdict will be reached as to whether it was successful.
However, this timescale isn’t set in stone and – in some situations – a Debt Relief Order can take longer than ten working days to process.
A Debt Relief Order can be refused for the following reasons:
If your application is refused, the fee cannot be refunded. As a result, it’s vital to ensure the DRO is accurate being submitting. Furthermore, if you feel your application was refused in error, you could challenge the decision.
Between 2009 and 2019, it’s estimated that Debt Relief Orders have written off around £2.3billion worth of debt*.
*According to The Insolvency Service, '£2.3 billion debt relief granted in 10 years of DROs', April 2019.
One possible alternative to a DRO is an IVA. Although a Debt Relief Order is not the same, they share a few similarities. For example, those on either solution will be added to the insolvency register and creditors cannot take legal action against you in most cases.
However, there are several key differences. For example:
Generally, a Debt Relief Order can be a preferred solution if you cannot afford to make any monthly payments and have limited assets. However, as everyone’s circumstances are different, it’s essential to seek specialist debt advice before committing to one solution.
A Debt Relief Order can help you control your finances – especially if you think your situation won’t improve within the year. However, get in touch today for a no-obligation chat and we’ll help determine if it is the right option for you.
Simply get in touch with our advisors through the contact form below and we’ll do our best to help.
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* As of 10/02/22 20,601 of our customers were in an active IVA. ** Average unsecured debt anticipated to be written off for IVAs approved between 1 January 2021 and 31 December 2021 for FSS customers is £10,645.20, based upon successful completion. *** Based on independent verified reviews from Feefo.
A Debt Relief Order won’t stop bailiffs if you’ve made a previous arrangement with them – for example, through a controlled goods agreement. Furthermore, bailiffs can be used if you owe something on a hire purchase agreement. In the event of a DRO, creditors could still employ these individuals to reclaim goods.
A Debt Relief Order lasts for 12 months. If your financial situation hasn’t improved while the DRO is active, any debts included are written off.
To get a Debt Relief Order, you’ll need to make an application through a specialist DRO advisor and pay the accompanying administration fee. You can find one of these individuals at the following organisations.
Upon completion of a Debt Relief Order, any funds owed will be written off. This effectively leaves you in a position to rebuild your finances. However, your credit rating will be severely affected for at least six years.
During this time, you’ll probably be unable to secure loans or additional lines of credit.