If you have debts but are unable to pay them, you would usually apply for an Individual Voluntary Agreement (IVA) or a Debt Management Plan (DMP) however, not everyone can qualify for these. If this is the case for you then you should consider a Debt Relief Order (DRO).
A DRO means that you will not have to pay monthly payments into your debts and it can often be a much cheaper alternative to declaring bankruptcy. A DRO will last for about a year and during that period; your creditors will be unable to take action against you for the money you owe them. Your DRO will cover certain debts and when it is over, those debts will be behind you.
There are certain criteria you must fulfil before you are eligible for a DRO. These include:
1. Owing less than £15,000.
2. Having less than £50 to spare after household expenditures.
3. Owning less than £300 worth of assets excluding your car which must be worth less than £1000
4. You have lived and worked in England for at least three years.
If you can satisfy these terms then a DRO can see you debt free within a year. You won’t need to make monthly payments, we will handle any contact with creditors, you can contact us for advise, and get access to online help.
If you decide to get a DRO then you will have to pay a one off fee of £90 which goes to the Debt Insolvency Service. This is far cheaper than bankruptcy which can cost up to £750 per person. The fee of £90 must be paid before the DRO can be put in effect. If you have trouble paying this then you can pay the fees in instalments rather than all at once.
A Debt Relief Programme isn’t for everyone and there are some down sides to it. You should be aware that it will be on public record for 15 months and be on your credit record for six years and once you have a DRO, you may find it difficult to open a bank account. If your financial situation improves whilst your DRO is in effect, you will then be expected to pay the debts. You will also have to inform a lender that you have a debt relief programme if you want to borrow more than £500. Fees may have changed since writing.
A Debt Relief Programme can be a step in the right direction but of course it depends on your circumstances. If you don’t think it is best for you or you don’t fit the criteria then you should look into Individual Voluntary Arrangement, a Debt Management Plan, or Bankruptcy.