The changes to Debt Relief Orders (DRO) were widely welcomed by debt charities and campaigners as many claimed the £90 fee prevented some of the country’s most vulnerable from getting the debt help they desperately needed
A whole raft of new measures to help those dealing with debts will be introduced next week.
In the Spring Statement, Chancellor Jeramy Hunt announced that charges for Debt Relief Orders (DRO) would be scrapped. Currently, it costs £90 to get a DRO however this fee will be removed from April 6, 2024. The scope of DROs will also be changed with the maximum value threshold rising from £30,000 to £50,000. The maximum value of a vehicle that a person can retain with a DRO is also rising from £2,000 to £4,000 – however, the latter two changes will not be introduced until June 28.
These changes were widely welcomed by debt charities and campaigners as many claimed the £90 fee prevented some of the country’s most vulnerable from getting the debt help they desperately needed. According to figures from the Insolvency Service, in 2023, some 31,717 DROs were granted in England and Wales – more than at any other point in the last five years.
But what exactly is a DRO and how would the changes help if you needed one? Here we explained everything you need to know.
A debt relief order is one way for people to deal with debts. The concept was introduced 15 years ago and was intended to provide a simpler and cheaper path through insolvency for the individual.
If you have a DRO, it lasts for 12 months and can freeze some, or all of your debts during this time. This means you do not need to pay them. After one year, your debts can be written off completely if your circumstances haven’t changed. A DRO is only issued if it’s unlikely you’ll be able to clear your debts and you meet the eligibility criteria.
According to Citizens Advice, you can apply for a DRO if:
- You have qualifying debts of less than £30,000 (rising to £50,000 from June 28)
- You don’t own things of value or have savings over £2,000 (car value limit is raising to £4,000 from June 28)
- You have £75 or less spare each month after paying your household bills
- You’ve lived or worked in England and Wales within the last three years
The debts you can use a Debt Relief Order for are called qualifying debts., and these include:
- Arrears with rent
- Utility bills
- Telephone bills
- Council tax and income tax
- Outstanding borrowing on credit cards, loans and overdrafts
- Business debts and money owed to friends and family
You can only apply for a DRO through an approved person known as an intermediary and most free debt advice providers have approved intermediaries who can help you. It currently costs £90 to get a DRO but as mentioned above, this will be scrapped from April 6. Currently, you need to pay the entire fee before your DRO is accepted.
If you’re experiencing problem debt or are feeling stressed about money, you don’t have to suffer in silence. The sooner you reach out for help and speak to someone about what you’re going through, the sooner you can get your finances back on track.
Contact Stepchange.org for online debt advice 24 hours a day, 365 days a year, or call 0800 138 1111, Monday to Friday 8am to 8pm and Saturday 8am to 4pm.
