DEBT RELIEF ORDER (DRO)
Bankruptcy is a legal process designed to help individuals who are unable to repay their debts. It can lead to the cancellation of most of your debts, giving you a fresh start. However, it involves a legal process and certain conditions must be met.
Benefits
- A Debt Relief Order is a formal solution, which means creditors included in the DRO cannot take legal action against you or chase you for payments.
- All debts in a DRO are typically cleared after one year, if your circumstances do not improve.
- During the 12 months that the DRO is in place, you will not be required to make payments towards the included debts.
- Interest and charges to debts included in the DRO are frozen for the 12-month period.
Risks
- A DRO will affect your credit rating and remain on your credit file for 6 years, which can significantly limit your ability to obtain credit in the future.
- A DRO may affect your employment, particularly if you work in certain professions (e.g. financial services).
- If your circumstances improve during the 12 months, (e.g. you receive a lump sum or increase in income), your DRO could be revoked, and you may be required to repay your debts.
- You must not have savings or valuable items worth more than £2,000
- It is a criminal offence to provide false information when applying for a DRO.
