Tackling your debts

I own my home, will I lose it if I enter into a DRO?

Posted 14 October 2015

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Thinking of a DRO, but own your own home? Find out what happens here.

If you’ve found yourself in a situation that means you’re having to think about debt solutions to cope with your unmanageable debts, it’s important that you understand exactly what you’re getting yourself into. This is especially true if you own a house. 

But, before we move on we want to point out that this advice is for people living in England and Wales. The rules are slightly different in Scotland, so please see our Debt Help pages to see more advice on the debt solutions available in Scotland, which include Debt Arrangements Schemes, MAP and the Scottish version of bankruptcy, Sequestration.   

One of the options available to you if you’ve got unmanageable debts is a debt relief order, called a DRO for short. These allow you to stop making payments towards your debts for a year and then, if your situation hasn’t changed, what’s left of the debts included in the DRO are written off. 

What criteria do I have to meet to get a DRO?

There are a number of criteria you need to meet in order to be eligible for a DRO, and one of these is that you cannot have assets worth more than £1000, so if you own your home, your assets will more than likely be more than £1000. However, if you lived in a property that’s worth less than £1000, a caravan for example, you would be able to keep your home and enter into a DRO as well. 

But for most people owning a home will exclude you from a DRO, so you’ll need to think about a different debt solution. But that doesn’t mean there’s nothing you can do – there are other options available. It's also worth noting that if you own your home and it's in negative equity, so essentially is not worth £1000, you still will not be able to enter into a DRO. 

What debt solutions can I have if I own a home?

If you do own a home, you need to be looking at other kinds of debt solutions. And to decide which might be best for you, it’d be useful to think about:

·         whether you’re able to make any payments or not

·         if you want to try to keep your home or you’re  happy to sell it

·         how much debt you have and what kind of debt it is – secured, like a mortgage or unsecured, like a credit card

The answers to these questions will determine what kind of solution is the best for you. You may want to think about a debt management plan, which is  available to homeowners or an IVA which allows you to keep your home. However, with an IVA you will be expected, in some circumstances, to release some equity in your property, if there’s any available, to pay towards your debts.

You could find out if bankruptcy is a suitable option for you, but again, you may be expected to sell your house, or at least your share of it, if you choose to enter into this solution.   

It’s important to remember that all debt solutions have pros and cons. Whilst they may see like a great way to ease the pressure of unmanageable debt, you also have to think very carefully about how your life will be affected in both the short and long term. So, we’d always advise speaking to a trained debt advisor before making any decisions about what you’d like to do. 

If you think you’d like to talk to someone about the different options available to you, you can get free impartial advice from the Money Advice Service. Or you can chat with one of our fully trained advisors using one of the ‘contact us’ options on the left of the page.  



by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.