What effect will a Debt Relief Order have on me?
28 June 2012
A Debt Relief Order (DRO) is no easy way out of debt. If you enter a DRO, it'll mean there are some things you can't do - and some things you have to do.
On the other hand, a DRO can actually write off your unsecured debt in just one year: if you qualify for a DRO, it could make a huge difference to your monthly finances.
Below we take a look at some of the restrictions that come with a DRO. If you'd like more information about DROs, check out our DRO page.
If you're planning to borrow £500 or more, whether on your own or with another person, you must tell the lender that you're subject to a Debt Relief Order.
Note that this also applies to 'getting credit by acting with the intention of getting it' (to quote the Insolvency Service exactly), which could mean ordering something without actually asking for credit - but not paying for it when it arrives.
Carrying on a business
Entering a DRO can have an impact on the way you work. If you carry on a business under a different name (one that's not the same as the one you were granted a DRO under), you'll have make things clear to everyone you're doing business with - and tell them the name you were granted your DRO under.
You also can't be involved with the 'promotion, management or formation' of any limited company - or act as a company director - without getting permission from the court first.
Your future options
Looking to the future, please be aware that entering a DRO is something you won't be able to do for another six years.
That's not the only effect your DRO will have on your future: it'll also stay on your credit record for six years, which is likely to make it harder and/or more expensive to apply for credit in that time.
Plus, your details will appear in the Individual Insolvency Register while your DRO is in progress - and for three months after it finishes.
Opening a bank account
Once your DRO has been granted, you can open a new bank account (or building society account), although they may ask you whether you're subject to a DRO. They may decide not to let you open an account - or may offer you a basic bank account.
You mustn't apply for an overdraft without telling them you're subject to a DRO. You're also not allowed to write cheques that are 'likely to be dishonoured'.
Benefits of a DRO - a reminder
With restrictions like these, why would someone want to enter a DRO? Here's a reminder of the benefits of entering a DRO.
Remember that DROs are only available to people who really need one. You'd need to meet some strict very criteria before you're allowed to enter a DRO (see 'Who can get a DRO?' on this page).
Once your DRO starts, a 'moratorium' will be placed on the debts included in your DRO (usually for 12 months). In other words, you won't have to make any payments towards your debts, and your lenders won't be able to do anything to get you to do that.
At the end of that period, those debts will be written off, unless your circumstances have changed enough for you to start making payments towards them again.
If you'd like to know more about DROs and other ways of tackling your debts, you can fill in the callback form on this page or call us on 0800 195 2714.