Can I use a DRO for payday loan debt?
Payday loans are known for their high interest rates. If you can't pay them back on time, the costs can really start climbing. A DRO could help with this, as payday loans can be included.
While the DRO is running, all interests and charges on your debts may be frozen, which could really help if you’ve been struggling with high interest credit. Although this isn’t guaranteed, and if the DRO is revoked for any reason, you could be left with a larger balance than you started out with.
A DRO could help you with your other unsecured debts too – meaning any debts where a lender won’t automatically have rights to your assets. These may include credit cards, overdrafts, personal loans, or other unsecured loans. Priority debt arrears can be included too, such as council tax, utility bill arrears and so on.
There are some types of debts that will be excluded from a DRO, such as secured loans, court fines, child support payments or student loans. Your debt advisor will tell you if any of your debts are excluded.
Do I have to make any payments on a DRO?
Once a DRO has been agreed, all payments on your unsecured debts will be suspended. The only payment you'll make is the one-off application fee of £90. Find out more about the fee here.
Before the end of your DRO, a review will be completed by your Official Receiver and if your situation improves and the Insolvency Service deem you can afford to repay your debts, the DRO may come to an end and you would be expected to start making normal payments again. If your circumstances haven’t improved and you are still unable to repay your unsecured debts by the end of the 12 months, the debts will be written off.
If you receive a lump sum or windfall payment, such as an insurance reclaim, bonus, PPI payment, benefits repayment, inheritance and so on, you have a legal obligation to make the Insolvency Service aware of this as it could affect your DRO. Your Official Receiver could review this and decide you’re in a much better position to make your debt repayments and revoke your DRO.
Will being unemployed affect my DRO application?
No. When you apply for a DRO, only your ability to repay your debts is taken into consideration (along with the other eligibility criteria). Whether or not you are employed isn't a factor.
A DRO could be an ideal debt solution if you're unemployed, because it doesn't require regular payments. However, if after finding work you are able to repay your debts as normal, your DRO may be reviewed and revoked if it’s deemed you can now afford your repayments.
What are the downsides of a DRO?
It's important to remember that a Debt Relief Order is an insolvency solution that is only available to people with very serious debt problems. As such, there will be an impact on your credit rating, with a record of the DRO remaining on your credit report for six years.
Your employment opportunities may be affected and certain jobs (such as a company director) are ruled out during the DRO. It’s important to check if you might be affected before you apply.
Not getting help with your debts could have its own serious consequences – so don't hesitate to contact us if you're struggling.