A Debt Relief Order (DRO) is a scheme designed for those with debts up to £50,000 and less than £75 disposable income each month. With a DRO, your debts are frozen for 12 months, during which time your creditors can’t demand money from you or add interest. The debt gets written off if your circumstances have not improved at the end of the 12 months. It is a form of insolvency; your name will be recorded on the insolvency register.
It is a scheme for non-homeowners and people with very few assets so their belongings can not be sold to repay creditors. You must have no more than £4,000 worth of assets to qualify for a DRO.
Pros and Cons of a DRO
Benefits
- Alternative to bankruptcy
- Don’t have to pay anything for 12 months
- Debt written off after 12 months
- Protection from Creditors during the 12 months
- Formal Solution without court appearance
Thing to consider
- Can only apply of you owe less than £50,000 (England and Wales) £20,000 (Northern Ireland)
- Cannot have an asset worth more than £4,000
- Your details will be recorded on the public register.
- Cannot be a homeowner
- Your credit file will be affected
Fees
For more information on Debt Relief Orders in England, Wales and Northern Ireland, click HERE
Debt Arrangement Schemes (DAS) – This is for Scotland only
A debt arrangement scheme (DAS) is a way management your personal debts which is available to residents of Scotland by the Scottish government.
Pros and Cons of a DAS
Pros
- Legal protection from your creditors which includes your home
- Prevents legal recovery
- Stopes future interest and charges from the date of approval and fully waived when your DAS is completed.
- Flexible to your circumstance which can be changed
Cons
- Your debt will need to be fully repaid which can extend the term
- Credit rating will be effected
- Interest may be re-added to the debts if you fail to complete your DAS scheme
- You cannot use further credit without approval from a DAS administrator
For more information on Debt Arrangement Scheme in Scotland, click HERE