Notice of defaults: everything you need to know
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Are you looking at ways to clear your debts? If you meet the criteria, a Debt Relief Order can suspend your repayments and write your unsecured debts off.
A Debt Relief Order is a formal debt solution that’s designed to help the people who are struggling the most with their debts. If you qualify, it has the power to suspend your repayments and write your unsecured debts off after a year. Because a DRO offers people the chance to suspend their payments altogether, freeze interest and charges and write debt off, the criteria to qualify is quite strict.
How do you qualify for a DRO?
DROs are available to people in England, Wales and Northern Ireland who have unsecured debts – such as credit card and overdraft debt - of up to £20,000. If you live in Scotland the Minimal Asset Process is a similar solution. In order to qualify for a DRO, you have to show that you don’t have a lot of spare money to put towards your debts each month. After all your other essential bills have been paid, you need to have less than £50 in disposable income to qualify.
Your assets also have to be worth less then £1,000 – your car is looked at separately and also can’t be worth more than £1,000. A DRO is a way to deal with insolvency like bankruptcy, but unlike bankruptcy it only costs £90, as opposed to £680.
If you fit the criteria above and start a DRO, your unsecured debts will be frozen for a year and if your circumstances don’t improve after that time, they will be written off completely.
Are there any downsides?
The main downside to a DRO is that it will affect your credit history. By starting this solution you will be breaking the terms of the agreements that you first signed with your creditors and because of that, your DRO will stay on your credit history for six years from the date that it starts. This damage means it will be harder or more expensive to get credit or certain services over that period.
If your circumstances do improve during the year of your DRO, then you may have to resume your repayments and look into another more appropriate debt solution.
What’s the next step?
If you think that a DRO might be right for you, it’s really important that you speak with a debt advisor. You’re only able to apply for a DRO through an approved intermediary (a company with the necessary permissions to recommend this solution). They’ll be able to tell you for sure if it’s right for you, and if it’s not they will recommend the best solution for your circumstances.
by Christine WalshBack to blog home