A Debt Relief Order is an order you can make an application for when you are unable to repay the debt you have.
A Debt Relief Order is granted by the Insolvency Service and is a cheaper option than declaring yourself bankrupt.
Who is a Debt Relief Order for?
- You have qualifying debts and the total debt should be less than £15,000.
- You have spare available income of £50 or less a month after paying your normal household expenses.
- You have a low-income.
- You don’t own things of value or have savings over £300.
- You don’t own a vehicle that has a value of £1000 or more. However this doesn’t apply if you have a physical disability and the car has been specifically adapted for this.
- You must have lived, had property or carried on a business in England or Wales.
How long does a Debt Relief Order last for?
A debt relief order usually lasts for a year. During this time, none of the creditors you owe money to will be able to take action against you to get their money back. After the year has passed you will be free of all the debts listed in the order.
How to apply for a Debt Relief Order?
To make an application for a Debt Relief Order, you will need to contact an authorised adviser. The adviser will check whether you meet the required conditions and will then apply for the order on your behalf.
Currently a Debt Relief Order costs £90, however you are able to repay this in instalments over a period of six months.
What types of debts can you include in a Debt Relief Order?
Only certain types of debt can be included in a Debt Relief Order. These debts are referred to as qualifying debts and can include the following examples: –
- Credit Card Debt.
- Overdraft Debt.
- Personal Loan Debt.
- Council Tax.
- Benefit Over payments, unless this over payment was obtained by fraud.
- Hire Purchase or Conditional Sale Agreements.
- Buy now, Pay later agreements.
When adding Hire Purchase or Conditional Sale agreements onto a Debt Relief Order, you may be required to return the goods to the original creditor, unless someone else can pay the instalments for you. You will not be able to carry on paying for the goods once you have a Debt Relief Order in place.
What types of Debt can’t be included in a Debt Relief Order?
Certain types of debt can’t be added onto a Debt Relief Order. You are required to pay for these separately. The creditors you owe these debts to can still take action against you, even if you have a debt relief order. Examples of debts you cannot include are: –
- Court Fines and Confiscation Orders. These are fines relating to criminal activity.
- Child Support and Maintenance.
- Student Loans.
- Social Fund Loans.
Who can’t get a Debt Relief Order?
You will not be able to get a Debt Relief order if: –
- You are currently Bankrupt.
- You have an Individual Voluntary Arrangement or you are applying for one.
- Your creditors have applied to make you bankrupt but the hearing has not taken place. You may still be able to apply for a Debt Relief Order if your creditors agree.
- You have been given a Bankruptcy Restrictions Order or Undertaking.
- You have petitioned for Bankruptcy but your petition has not yet been dealt with. However this does not apply if you have petitioned for Bankruptcy and the Judge has referred you on for a debt relief order.
- In the last six years, you have already had a Debt Relief Order.
- You have been given a Debt Relief Restriction Order or Undertaking.
What can’t you do when you have a Debt Relief Order?
While a Debt Relief Order is in place, there are certain restrictions on the things you can do. Examples of these restrictions are: –
- Obtaining Credit over £500 without notifying the lender that you have a Debt Relief Order.
- Carrying on a Business with a different name from the one under which you were given a Debt Relief Order, without notifying all those you do business with of the name of the business given the Debt Relief Order.
- Being involved in, promoting, managing or setting up a limited company, without getting permission from the court. You are also unable to act as a company director without first obtaining permission from the court.
If the Official Receiver believes that you have provided incorrect information, or that you have been dishonest then they can apply for a Debt Relief Restriction Order.
What is a Debt Relief Restriction Order?
If you are given a Debt Relief Restriction Order, this means that the restrictions on the things you can do can last between 2 and 15 years.
However, the Debt Relief Order itself will still last 12 months and you will not be required to pay off any of the debts listed on the order.
Should you not follow the restrictions, you will be committing an offence. The end result of this could lead to imprisonment or a fine.
For further advice, see the Debt Help section of this Blog. Listed on that page are organisations who can help you with your debt problems.