If you’re struggling with debt and someone has mentioned a Debt Relief Order, you might be wondering what it actually involves.
- Is it bankruptcy?
- Is it permanent?
- Will it ruin your credit forever?
Let’s walk through exactly how a Debt Relief Order works in the UK, who qualifies, what happens during it and what it means for your future.
What is a Debt Relief Order?
A Debt Relief Order, often shortened to DRO, is a formal insolvency solution for people with low income, minimal assets and relatively small debts.
It’s designed for situations where repaying debts realistically isn’t possible.
If approved, your qualifying debts are frozen for 12 months.
During that time:
- You don’t make payments to included creditors
- Creditors can’t chase you for the debt
- Interest and charges are stopped
After 12 months, those debts are written off, as long as your circumstances haven’t improved significantly.
It’s serious. But for the right person, it can be life changing.
Who can apply for a DRO?
You may qualify for a DRO if you:
- Owe £50,000 or less in total unsecured debts (limit increased in 2024).
- Have £75 or less spare income each month after essential bills.
- Own assets worth no more than £2,000 (excluding normal household items).
- Own a car worth £4,000 or less (up from £2,000 previously).
- Don’t own your home.
- Live, or have lived/worked, in England, Wales, or Northern Ireland in the last 3 years.
- Aren’t already in another insolvency process.
And since April 2024, the £90 application fee has been abolished, making DROs completely free when arranged through an approved adviser.
What debts can you pay with a Debt Relief Order?
Most government debts are covered by a DRO. That can include some priority debts and most non-priority debts.
The cynical amongst you will quickly realise that the order can write off debts to everyone except the government.
That includes:
- Rent
- Energy bills
- Credit cards
- Personal loans of any kind
- Store cards
- Overdrafts
- And most other debts
Debts not included:
- Court fines
- Student loans
- Government loans such as those from the Social Fund
- TV licence arrears
- Outstanding child maintenance
- Any finance acquired by fraud such as benefit overpayments while you were working
If you’re a homeowner, you cannot qualify for a DRO. You’ll need another solution.
How does a debt relief order work step by step?
This is where clarity matters.
Step 1: Speak to an approved debt adviser
You can’t apply directly. A qualified debt adviser must assess your finances and submit the application on your behalf.
They’ll review your income, expenses, debts and assets carefully.
Step 2: Application is submitted to the Insolvency Service
The adviser sends your application to the Official Receiver.
Step 3: Approval and 12-month moratorium
If approved, you enter a 12-month period known as a moratorium.
During this time:
- You don’t make payments towards included debts
- Creditors cannot take enforcement action
- Bailiff action related to those debts must stop
You must inform the Official Receiver if your financial situation improves.
Step 4: Discharge
After 12 months, if your circumstances haven’t improved significantly, the included debts are written off.
That’s the core of how a Debt Relief Order works.
What happens to your credit rating?
A Debt Relief Order will appear on your credit file for six years.
During that time:
- Getting credit will be harder
- Mortgage applications will usually be declined
- Some landlords may run credit checks
That sounds heavy, but here’s the honest question.
If you’re already missing payments or defaulting, your credit file is likely already damaged.
A DRO doesn’t create the problem. It formalises and resolves it.
Can you work or rent with a debt relief order?
Yes, a DRO doesn’t stop you working or renting.
However, certain professions with financial responsibilities may have restrictions. Always check your employment contract.
If you rent privately, most landlords won’t automatically know unless they check the Insolvency Register.
What happens if your situation improves?
If your income increases significantly during the 12-month period and you now have more than £75 surplus income per month, your DRO could be revoked.
That means the debts would no longer be written off.
You’re expected to report changes honestly. The system relies on transparency.
Is a debt relief order better than bankruptcy?
A DRO is often described as a “simpler” or “cheaper” alternative to bankruptcy, but that doesn’t mean it’s lighter in impact.
Bankruptcy may be more suitable if:
- Your debts exceed the DRO limit
- You own property
- Your financial situation is more complex
If you’re unsure, compare all options carefully. My post on priority and non-priority debts can help you understand which debts matter most when making that decision.
Alternatives to a debt relief order
A DRO isn’t the only solution.
Depending on your circumstances, you might consider:
- Debt management plan: An informal arrangement to pay back debts at a reduced rate over time.
- Individual voluntary arrangement (IVA): A formal agreement to repay part of your debt over several years.
- Breathing space scheme: A temporary pause on creditor action while you get advice.
If you’re in the early stages of financial stress, my guide on how to handle a temporary financial setback might be a better starting point.
What happens during and after a DRO?
- During the year: Creditors are prevented from chasing you for repayment. You must not obtain more than £500 credit without disclosing the DRO.
- After 12 months: Included debts are written off, giving you a clean slate.
- Credit file impact: A DRO remains visible for six years, which may affect future borrowing.
- Revocation risk: If your circumstances improve (new income, inheritance, or assets), the DRO could be cancelled, but this happens in only around 1% of cases.
When a DRO may not be right for you
A DRO may not be suitable if:
- You own your home.
- You have more than £75 a month in disposable income.
- Your assets exceed the limits.
- Your debts are mainly priority debts (like rent arrears or secured loans).
In these cases, alternatives such as an IVA, bankruptcy, or a Debt Management Plan may be more appropriate.
Read: Debt Management Plans explained
Where to get help with a DRO
DROs can only be set up through an authorised intermediary. Free providers include:
- Citizens Advice
- StepChange Debt Charity
- Christians Against Poverty (CAP)
- National Debtline
Never pay a commercial company for DRO advice. Genuine charities and advisers will help you for free.
Debt Relief Orders and you
A Debt Relief Order isn’t a quick fix. It’s a structured solution for people who genuinely can’t repay their debts.
If you qualify, it can give you space to reset without years of unmanageable repayments.
If you don’t qualify, that doesn’t mean you’re stuck. There are other routes forward.
The key is clarity. Know your numbers. Get proper advice. Make a decision based on long-term stability, not short-term panic.
DRO FAQs
1. Who is eligible for a DRO in 2025?
You must owe £50,000 or less in unsecured debt, have £75 or less in spare monthly income, assets worth under £2,000, and no home ownership. You must also live in England, Wales, or Northern Ireland and not have had a DRO in the past 6 years.
2. Is there still a fee for a DRO?
No. Since April 2024, the £90 application fee has been removed, making DROs free to apply for through approved intermediaries.
3. What happens to my debts during the DRO year?
All qualifying debts are frozen. Creditors cannot chase you or add interest. If your situation doesn’t improve, those debts are written off after 12 months.
4. Can my DRO be cancelled if my circumstances improve?
Yes, if your income rises or you gain assets, the Insolvency Service can revoke your DRO. However, this is rare, only around 1% are revoked.
5. How does a DRO affect my credit rating?
The DRO stays on your credit file for six years. This makes getting new credit difficult, but it also shows your debts have been legally resolved, offering a fresh start after the six years.
