Debt relief orders explained: bankruptcy for smaller debts
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Quick answer: A Debt Relief Order (DRO) is a free insolvency option for people with qualifying debts under £50,000, less than £75 monthly surplus, and few assets. Debts are frozen for 12 months then written off if your situation has not improved.
DROs were created for people who need debt relief but cannot afford the £680 bankruptcy fee and have relatively small debts. There is no application fee since April 2024. They freeze repayments for 12 months and write off qualifying debts at the end if your financial situation has not improved. They are simpler and cheaper than bankruptcy but have strict eligibility criteria.
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Content updated: 2 min read
Primary source: www.gov.uk/options-for-paying-off-your-debts
Eligibility criteria
You must owe less than £50,000 in qualifying debts, have less than £75 per month surplus after essential living costs, have savings and valuables worth less than £2,000 in total, own no vehicle worth £4,000 or more, and not have had a DRO in the last six years.
You must have lived or worked in England or Wales in the last three years. You can't get this DRO if you live in Scotland or Northern Ireland: Scotland has the Minimal Asset Process (MAP), and Northern Ireland runs its own debt relief order scheme.
How a DRO works
An approved intermediary (usually through a free debt charity) helps you apply at no cost. The official receiver reviews and grants the DRO if you qualify.
During the 12-month moratorium, creditors cannot chase you for payment. If your situation has not improved at the end, qualifying debts are written off.
DRO vs other options
Compared to bankruptcy: DROs are free to apply for versus £680 for bankruptcy, simpler, and designed for smaller debts with fewer assets.
Compared to a DMP: a DRO writes off debt rather than requiring full repayment, but has stricter eligibility and a more severe credit impact.
Common questions
Can I get a DRO if I work?
Yes, if your surplus income after essential costs is less than £75 per month. Low-income workers with high debt can qualify.
What debts does a DRO cover?
Most unsecured debts including credit cards, loans, and overdrafts. It does not cover student loans, court fines, or child maintenance.
What if my finances improve during a DRO?
If your surplus income rises above £75 per month or you acquire assets above the threshold, the DRO may be revoked and you may need to repay debts.