Paying back debt can be overwhelming, especially if you have multiple creditors you’re indebted to. In this case, it can be helpful to have a break from creditor contact and debt repayments. If you qualify, a Debt Relief Order (DRO) allows you to be relieved from paying your debt for a period of 12 months. The hope is that your financial situation will improve during this time but if you’re still unable to pay debts covered by the DRO after 12 months have ended, these will be written off. 

While they can be an effective debt solution, DROs aren’t suitable for all circumstances. Generally speaking, you need to have little to no surplus income and no assets to repay your debts. Below, we’ll go into depth about the Debt Relief Order eligibility criteria and what the requirements are. 

What Are the Eligibility Criteria for a DRO?

To be eligible for a DRO, you need to meet all of the following criteria: 

• You can’t pay your debts
• Your debts which qualify for a DRO don’t exceed £50,000
• You don’t have more than £75 left over each month after household expenses
• You don’t have a mortgage
• Your savings and assets aren’t worth more than £2,000
• Your car isn’t worth than £4,000
• You haven’t had a DRO in the last six years
• You aren’t going through another formal insolvency process, such as bankruptcy or an Individual Voluntary Arrangement (IVA)
• You have lived, had a property or worked in England, Wales or Northern Ireland in the past three years.

Income and Debt Limits Explained

As mentioned above, to fit the DRO qualifying criteria, you can’t have more than £75 surplus income each month. To calculate how much you have left over each month, you’ll need to figure out your monthly income which can come from a number of sources such as your salary, benefits, pension and contributions from the household. 

Once you have your monthly income, you’ll then need to deduct allowable household expenses, which can include: 

• Rent
• Travel expenses
• Food
• Housekeeping
• Energy and water bills
• Utilities, e.g. TV and broadband.

To help you calculate this, you can try our disposable income calculator.

Although there is no upper limit on monthly income, the amount of income you have left each month after allowable expenses can’t exceed £75. 

There is a limit, however, on your debt amount as the total amount of debt you owe can’t exceed £50,000 or you won’t be eligible for a DRO. Most types of debt can be included in a DRO, such as: 

• Rent arrears
• Council tax
• Income tax
• Utilities arrears
• Benefit overpayments
• Credit card debt
• Overdrafts
• Hire purchase arrears.

There are some debts, however, that can’t be included in your DRO so you will have to pay them in full. You will need to list them in your DRO application but they don’t count towards your £50,000 limit. These include: 

• Court fines
• Student loans
• Child maintenance arrears
• Budgeting loans and crisis loans
• Money owed under a criminal confiscation order
• Debts from personal injury claims against you.

If you have any joint debts, the full amount will be counted towards your DRO limit. However, only the person with the DRO will be released from responsibility for that debt when the 12 months passes, so the other person can still be chased for the debt.

Asset Restrictions: What You Need to Know

As part of the Debt Relief Order criteria, your assets can’t be worth more than £2,000. Assets can include both money and items you own, such as 

• Cash
• Shares
• Savings 
• Money owed to you if you are able to get it back from the person who borrowed it

• Jewellery, not including wedding rings
• Antiques
• Property or land
• Technical valuables such as mobile phones and computers. 

However, certain things that are seen as essential for everyday life won’t be included in your asset total. These include: 

• Money for household expenses
• Most pension funds unless you can access the money now
• Household essentials, e.g. bedding, furniture, clothes
• Equipment necessary for your job. 

If you own a vehicle, this won’t be counted as an asset unless it’s worth more than £4,000. If your vehicle is worth more than £4,000 but has been adapted for a disability you have, this won’t be counted as an asset either.

For those who have a vehicle on hire purchase (HP) or conditional sale agreement, this doesn’t count as an asset as it doesn’t belong to you until you’ve made all the payments. However, you may not be able to continue making payments towards it once you start your DRO. HP is only an allowable expense if the agreement is for:

• A vehicle worth less than £4,000
• An item that is needed to cover a basic domestic need
• A vehicle that has been adapted for your disability. 

Residency Requirements for a DRO

DROs are only available to those who have lived or worked in England, Wales or Northern Ireland in the last three years. If you’re currently based in Scotland or Northern Ireland, you’ll need to explore alternative options, such as a Minimal Asset Process (MAP) bankruptcy, designed for people with minimal assets and income. 

Who Shouldn’t Apply for a DRO?

While a DRO can be a helpful solution for many people struggling with debt, it’s not the right choice for everyone. There are certain restrictions on DRO criteria that may prevent you from qualifying, such as:

• If you have a mortgage

As mentioned above, you can’t have a mortgage when applying for a DRO. If you own a property and are still making mortgage payments, a DRO isn’t an option for you.

• If you can afford to repay your debts

DROs are designed for individuals who genuinely cannot afford to repay their debts. If you have a surplus income or assets that could be used to pay off your debt, you may not qualify for a DRO.

• If your debts exceed £50,000

The total debt you owe must be less than £50,000 to be eligible for a DRO. If your debt is higher, other debt solutions may be more appropriate.

• If you have assets worth over £2,000

If you own valuable assets, such as property, shares, or high-value items, a DRO may not be suitable for you.

• If you’re already in another formal insolvency process

If you’re already undergoing a formal insolvency process, such as bankruptcy or an Individual Voluntary Arrangement (IVA), you cannot apply for a DRO.

• If you’ve recently been made bankrupt

If you’ve been declared bankrupt within the last 12 months, you cannot apply for a DRO.

Common Misconceptions About DRO Eligibility

There can be several misconceptions about DROs that can lead to confusion. It’s important to clarify these so you can make an informed decision about whether a DRO is right for you. The most common myths about DRO eligibility include:

• Myth: You can include all debts in a DRO

While many types of debt can be included in a DRO, some cannot. Debts such as court fines, student loans, child maintenance arrears, and debts resulting from personal injury claims are not eligible for inclusion. This means you’ll still need to pay these debts even if a DRO is granted.

• Myth: You must be on benefits to qualify for a DRO

While having low income is a key factor in DRO eligibility, you don’t have to be on benefits to qualify. As long as your surplus income after allowable expenses is £75 or less, and your total debt is within the £50,000 limit, you could be eligible for a DRO, regardless of your income source.

• Myth: You can apply for a DRO if you have a lot of surplus income

You must not have more than £75 surplus income after deducting your allowable household expenses. If you have surplus income above this amount, a DRO is not the right option for you, and other debt solutions may be more suitable.

How to Confirm Your Eligibility

Before applying for a DRO, it’s worth checking you fit the eligibility criteria outlined earlier in this article. An important part of eligibility is the amount of debt, income and assets you have so it can be helpful to check:

• The total amount of qualifying debt you owe doesn’t exceed £50,000
• Your monthly surplus income isn’t more than £75
• The value of your assets is less than £2,000
• The value of your car is less than £4,000. 

However, the best way to confirm your eligibility for a DRO is to speak with a debt advisor. They can assess your financial situation and provide expert guidance on whether a DRO is the right solution for you. You can contact our team here at MoneyPlus, or get free advice from services such as MoneyHelper.