If you’re struggling with debt, you may be considering a Debt Relief Order (DRO). Designed for people with little to no income and assets, this debt solution allows you to pause debt repayment for 12 months. If your financial situation hasn’t improved by the end of this period, the remaining debt included in the DRO will be written off. 

However, there are a number of DRO rules and restrictions that you’ll need to follow if you opt for this debt solution. Below, we’ll go through these rules in detail, so you’ll know exactly what to expect. 

What Rules Must You Follow During a DRO?

You’ll need to follow a set Debt Relief Order rules while you have this debt solution in place. For example:

• You must cooperate with the Official Receiver (OR)
• You must report a change in financial circumstances to your OR
• You must be honest about your financial situation before and during your DRO
• You can’t take out credit of £500 or more without informing the lender of your DRO
• You can’t hold certain public offices
• You must wait at least six years before applying for a DRO again
• You can’t be a company director
• You can’t be part of the promotion, management or formation of a limited company
• You can’t continue a business with another name without sharing that your previous business had a DRO. 

Restrictions on Borrowing and Credit

There are a number of DRO restrictions on borrowing and credit you’ll need to be aware of while completing a Debt Relief Order. As mentioned above, if you take out credit of £500 or more, you will need to tell the lender you have a DRO. Having a DRO indicates that you’ve struggled to keep up with payments before so it’s important lenders are informed of your DRO before they decide whether to enter a credit agreement with you. 

After your DRO has ended, it will remain on your credit file for six years, impacting it negatively and while this doesn’t restrict you from applying for credit, creditors will be able to see your credit history. This can often make it difficult to get credit for personal loans and mortgages and if you are approved, you may face high interest rates. It’s therefore worth waiting six years before applying for a mortgage or loan. 

Asset and Spending Limitations

To be eligible for a DRO, you must have minimal assets and low disposable income. This means that you’ll need to meet certain criteria including: 

• You can’t owe more than £50,000 in debt
• You can’t have more than £2,000 in assets
• Your vehicle can’t be worth more than £4,000
• Your monthly disposable income can’t exceed £75. 

These limitations apply for the duration of your DRO, meaning that if there are any changes to your financial situation, such as a salary or benefit increase, you must inform your OR. They will review your budget and check you’re still eligible. 

Although small changes likely won’t impact your DRO, you may receive a lump sum which can come from: 

• Inheritance
• Lottery win
• Compensation payment
• Backdated benefit payments. 

If this amount is significant, it may mean your assets exceed £2,000 or push your DRO expenditure allowance over £75 a month, meaning you’re no longer eligible. You must therefore tell the Insolvency Service DRO team within 14 days of receiving the lump sum who will review your case. 

However, your DRO won’t be cancelled if the lump sum is less than £1,000 or worth no more than 50% of the total amount of debt owed. 

How Does a DRO Affect Employment?

Before applying for a DRO, it’s important to check whether it will affect your profession. For example, the following rules may prohibit you from doing your current role: 

• You can’t hold certain public offices
• You can’t be a trustee for a charity or pension scheme
• You can’t be a company director without permission from the court
• You can’t engage in business under a name different from the one listed on the Individual Insolvency Register without sharing that you have a DRO.

If you work in certain professions, you will not be allowed to practise during your DRO. These include: 

• Solicitor
• Insolvency practitioner
• Estate agent
• MOT examiner.

If you’re in any of these roles, you’ll need to check your regulatory codes before applying for a DRO: 

• Barrister
• Accountant
• Chartered surveyor.

Consequences of Breaking DRO Rules

If you don’t comply with DRO order rules, you could face a number of consequences. For example, your DRO could be revoked or your OR may make a Debt Relief Restrictions Order (DRRO) against you, which means that you will have to follow DRO restrictions for an extended period of time, up to 15 years. Your OR may ask for a DRRO if you: 

• Gave away belongings or sold them at less than their value
• Prioritised paying certain creditors over others
• Committed fraud
• Refused to cooperate with the OR
• Were dishonest about your assets when applying for the DRO or about any assets you acquired during the DRO. 

If the OR decides to apply for a DRRO against you, you will be notified and given 21 days to respond.  If you accept the OR’s reasoning, you can agree to a Debt Relief Restrictions Undertaking (DRRU), avoiding court and potentially reducing the restriction period. 

If you disagree with the OR’s reasoning, a court hearing will be held to decide your case. However, you can offer to enter a DRRU at any time if you change your mind. 

Your details will remain on the Individual Insolvency Register for the duration of your DRRO or DRRU.Failing to follow the restrictions is a criminal offence and could result in fines or even imprisonment. It is therefore essential that you follow the rules and restrictions of DRO. 

If you have any questions about DRO rules or are looking for debt support and advice, you can contact our expert team here at MoneyPlus. Alternatively, you can get free debt advice from MoneyHelper.