A Debt Relief Order (DRO) is similar to bankruptcy in so far as it affords relief to a debtor who is insolvent but who has little or no disposable income and few if any assets. The relief of a DRO is currently available in the UK.
A DRO differs from bankruptcy in some crucial respects.
In England & Wales, the debtor must have debts of less than £30,000; disposable income must be less than £75 per month and assets must be less than £2,000. However, the debtor may be allowed to retain a vehicle with a somewhat higher value than £2,000 provided it is necessary for travelling to and from work or is essential for family transport.
In Northern Ireland, the debtor must have debts of less than £20,000; disposable income must be less than £50 per month and assets must be less than £1,000. However, the debtor may be allowed to retain a vehicle with a somewhat higher value than £1,000 provided it is necessary for travelling to and from work or is essential for family transport.
When the DRO is granted, the debtor is no longer responsible for paying their unsecured debts. Creditors can no longer pursue them for payment and they normally have nothing to pay towards their debts. The DRO lasts for one year and at the end of that time, all debts are discharged leaving the debtor debt free. The main negative effect of being subject to a DRO is that the debtor’s credit worthiness is compromised for a period of six years and the DRO will make it difficult to obtain credit until the debtor’s credit file is cleared, due to the defaults recorded therein.