Debt Relief Order (DRO): Pros, Cons, Eligibility, and What Life After a DRO Looks Like
A Debt Relief Order (DRO) is a formal insolvency solution available in England and Wales for people with relatively low levels of debt, few assets, and a low income. It freezes qualifying debts for a 12-month moratorium period, during which creditors cannot take action against you. If your financial situation has not improved by the end of those 12 months, the debts are written off entirely.
For people who qualify, a DRO offers a genuine fresh start. But it comes with restrictions during the moratorium period and leaves a significant mark on your credit file for six years. Understanding exactly what a DRO involves — the benefits, the drawbacks, who qualifies, and what life looks like on the other side — is essential before deciding if it is the right route for you.
What Is a Debt Relief Order?
A Debt Relief Order is a formal insolvency procedure introduced in England and Wales in April 2009. It is administered by the Insolvency Service and designed specifically for people who cannot afford to pay their debts but also do not have sufficient assets or income to make bankruptcy worthwhile or practical.
| DRO Feature | Detail |
| Available in | England and Wales only (not Scotland or Northern Ireland) |
| Administered by | The Insolvency Service |
| Application route | Via an approved intermediary — cannot apply directly |
| Cost | £90 fee (payable to the Insolvency Service via intermediary) |
| Moratorium period | 12 months |
| What happens after 12 months | Qualifying debts written off if financial situation unchanged |
| Debt limit (2024) | Qualifying debts must be under £30,000 |
| Asset limit | Assets must be under £2,000 (with exceptions) |
| Disposable income limit | Must be under £75 per month after reasonable living expenses |
| Vehicle allowance | You can keep a vehicle worth up to £4,000 |
| Credit file impact | 6 years from the date of the DRO |
DRO Eligibility: Who Qualifies?
To qualify for a DRO in 2024-2025, you must meet all of the following criteria at the point of application:
Debt threshold
Your total qualifying debts must be £30,000 or less. This threshold was increased from £20,000 in June 2021 and from £25,000 in June 2024, making DROs accessible to more people. Not all debts qualify — student loans, child maintenance arrears, magistrates’ court fines, and some other debts are excluded.
Asset threshold
Your total assets must be worth £2,000 or less. A vehicle worth up to £4,000 is exempt from this calculation (you can keep it). Your home is not included — but if you own property with equity, you are unlikely to qualify for a DRO at all, as the equity in a property is an asset. Most DRO applicants are renters rather than homeowners.
Disposable income threshold
After deducting reasonable monthly living expenses from your monthly income, you must have £75 or less remaining (disposable income). The living expenses allowances are assessed against the DRO expenditure allowances — standard amounts set by the Insolvency Service for housing, food, clothing, transport, and other essential costs. If your spending on a category exceeds the allowance, this may be queried during the application.
Other conditions
- You must be resident in England or Wales, or have conducted business there within the last three years
- You cannot have had a DRO in the previous six years
- You cannot currently be subject to another insolvency procedure (bankruptcy, IVA, etc.)
- You cannot have been dishonest in obtaining credit or have deliberately worsened your financial position before applying
DRO Expenditure Allowances Explained
The DRO expenditure allowances are standard monthly amounts that the Insolvency Service uses to assess your disposable income. They represent what is considered reasonable spending across different categories of household expenditure.
The allowances cover categories including:
- Housing costs — rent, mortgage, council tax, water rates, utilities
- Food and household supplies
- Clothing and footwear
- Transport — public transport or car running costs if a vehicle is essential
- Healthcare — prescriptions, dental, optician costs not covered by NHS
- Communications — phone and basic internet
- Childcare and dependent costs where applicable
If your actual spending on any category significantly exceeds the allowance, your intermediary will discuss this with you. The allowances are reviewed periodically by the Insolvency Service. For the most current figures, StepChange (stepchange.org) and the Insolvency Service website (insolvency.service.gov.uk) publish up-to-date allowance tables.
Debts Included and Excluded in a DRO
| Typically INCLUDED in a DRO | Typically EXCLUDED from a DRO |
| Credit cards | Student loans |
| Personal loans and overdrafts | Child maintenance and CSA arrears |
| Utility bill arrears (gas, electric, water) | Magistrates’ court fines |
| Council tax arrears | TV licence fines |
| Buy-now-pay-later debts | Fraud debts |
| Catalogue and store card debts | Confiscation orders |
| Rent arrears (some) | Social fund loans |
| HMRC debts (some) | Debts arising from personal injury claims |
Excluded debts are not written off at the end of the DRO moratorium — they remain fully enforceable. If you have significant excluded debts alongside qualifying debts, a DRO may not solve your full debt problem and you may need to consider alternative solutions.
Pros of a Debt Relief Order
- Debts written off: qualifying debts are completely written off after the 12-month moratorium if your financial situation has not improved. You start with a clean slate.
- Creditors cannot pursue you during the moratorium: for 12 months, creditors included in the DRO cannot chase you for payment, issue court proceedings, or instruct bailiffs.
- Free to obtain through approved intermediaries: the only cost is the £90 Insolvency Service fee. Charities such as StepChange, National Debtline, and Citizens Advice all have approved DRO intermediaries who guide you through the process at no charge.
- Faster than IVA: a DRO concludes in 12 months. An IVA typically lasts 5-6 years.
- Lower threshold than bankruptcy: bankruptcy has a higher overall administrative cost and more significant consequences in some areas. A DRO is designed precisely for people who cannot afford bankruptcy.
- Stops interest accruing on included debts during the moratorium.
Cons and Risks of a Debt Relief Order
- Credit file impact for 6 years: the DRO appears on your credit file for six years from the date it is granted, significantly affecting your ability to get credit, mortgages, or finance during this period.
- Insolvency register: DROs are listed on the public Individual Insolvency Register at insolvency.service.gov.uk, which is searchable by anyone.
- Restrictions during the moratorium: you cannot obtain credit over £500 without declaring you are subject to a DRO. You cannot act as a company director. Certain professional roles may be affected.
- Your income and assets are monitored: if your financial situation improves significantly during the moratorium — for example, you receive an inheritance or a significant pay rise — the DRO may be revoked.
- Not available for homeowners with equity: if you own your home with meaningful equity, you will not qualify.
- Excluded debts remain: student loans, child maintenance, court fines, and some other debts are not written off.
DRO vs Bankruptcy: The Key Differences
| Factor | DRO | Bankruptcy |
| Debt limit | Under £30,000 | No upper limit |
| Asset limit | Under £2,000 | No set limit (assets may be sold) |
| Income threshold | Under £75/month disposable | No specific threshold |
| Cost | £90 fee | £680 fee |
| Duration | 12-month moratorium | Typically discharged after 12 months |
| Credit file impact | 6 years | 6 years |
| Public register | Yes — Insolvency Register | Yes — Insolvency Register |
| Home at risk? | No (if no equity) | Possible — trustee can sell assets |
| Best for | Low income, low assets, low debts | Higher debts, assets to deal with |
For most people who meet the DRO criteria, a DRO is preferable to bankruptcy: it is significantly cheaper, quicker to process, and carries similar credit file consequences. Bankruptcy becomes the more appropriate option when debts exceed the DRO threshold, when there are significant assets that need formal administration, or when you cannot qualify for a DRO.
What Happens If Your DRO Application Is Refused?
A DRO application can be refused at two stages: during the intermediary assessment (if you do not meet the criteria) or by the Official Receiver after submission (if there are concerns about your conduct, the accuracy of information provided, or your eligibility).
Common reasons for refusal:
- Your debts exceed the £30,000 threshold
- Your assets exceed the £2,000 threshold
- Your disposable income exceeds £75 per month
- You have had a DRO within the last six years
- You are already in another insolvency procedure
- There are concerns about dishonesty or deliberate conduct that worsened your debts
If refused, your intermediary will discuss alternative debt solutions: an IVA, bankruptcy, a debt management plan, or negotiation with creditors directly. No application fee is lost in most cases if the intermediary identifies the ineligibility before submission.
Life After a Debt Relief Order: What to Expect
Once the 12-month moratorium ends and your DRO is complete, your qualifying debts are written off. From that point, life after a DRO involves rebuilding your financial profile over the following years.
Credit file and credit score
The DRO remains on your credit file for six years from the date it was granted. During this period, getting mainstream credit (credit cards, personal loans, mortgages) will be very difficult. After the six-year period, the DRO drops off your credit file automatically. Many people who complete a DRO begin the credit rebuilding process immediately after completion: registering on the electoral roll, opening a basic bank account if needed, and using a credit builder credit card with a small limit that is paid in full each month.
Getting a mortgage after a DRO
Obtaining a mortgage while a DRO shows on your credit file is very difficult. Specialist adverse credit lenders may consider applications with a large deposit (30-40%) and significantly higher interest rates, but mainstream lenders will decline. Most financial advisers suggest waiting until the DRO has dropped off the credit file entirely before seriously pursuing a mortgage, at which point the credit history is clean and mainstream lender rates become accessible again.
Banking
Most people with a DRO can open or maintain a basic bank account without a problem. Basic bank accounts (offered by all major UK banks under the Financial Inclusion commitment) do not require a credit check and are not affected by DRO status. You can receive wages, pay bills by direct debit, and access a debit card through a basic account.
Employment
Most employers are not affected by a DRO. However, if you work in financial services, are subject to FCA regulation, hold certain professional licences, or work in a role with access to client funds, your employer may be informed or your position may be reviewed. Check your employment contract and any professional body rules that apply to your role.
If some of your older debts may be approaching the statute barred period, see our guide to how long before a debt is written off — statute barred rules explained.
If you are considering a debt management plan instead of a DRO, see our guide to mortgages with a debt management plan and how DMPs affect your finances.
To apply for a DRO or check if you qualify, the Insolvency Service provides official guidance at insolvency.service.gov.uk.
StepChange provides free DRO applications through approved intermediaries at stepchange.org/debt-relief-orders.
This article is for informational purposes only. DRO eligibility rules may change. Always seek advice from a free, approved DRO intermediary such as StepChange (0800 138 1111) or Citizens Advice before applying.
Bottom Line
| Available in | England and Wales only |
| Debt limit | Under £30,000 qualifying debts |
| Asset limit | Under £2,000 (vehicle up to £4,000 exempt) |
| Income limit | Under £75/month disposable after expenses |
| Cost | £90 fee; free advice through StepChange/Citizens Advice |
| Moratorium | 12 months — creditors cannot pursue you |
| After 12 months | Qualifying debts written off if situation unchanged |
| Credit file | 6 years from DRO date |
| DRO vs bankruptcy | DRO: cheaper (£90 vs £680), for lower debts/assets |
| Free help | StepChange: 0800 138 1111 | Citizens Advice | National Debtline: 0808 808 4000 |
Frequently Asked Questions
What are the eligibility criteria for a Debt Relief Order?
To qualify for a DRO in England and Wales, your total qualifying debts must be under £30,000, your assets must be worth under £2,000 (a vehicle up to £4,000 is exempt), and your disposable income after reasonable living expenses must be under £75 per month. You must not have had a DRO in the last 6 years or be subject to another insolvency procedure.
How long does a DRO last?
The DRO moratorium period lasts 12 months. If your financial situation has not materially improved during those 12 months, your qualifying debts are written off at the end. The DRO then remains on your credit file for 6 years from the date it was granted.
What are the pros and cons of a Debt Relief Order?
Pros: debts written off after 12 months; creditors cannot pursue you during the moratorium; free via approved intermediaries (£90 Insolvency Service fee only); faster than an IVA. Cons: 6-year credit file impact; appears on public insolvency register; restrictions on obtaining credit over £500 during moratorium; excluded debts (student loans, court fines, child maintenance) are not written off.
What is life like after a Debt Relief Order?
After a DRO completes, qualifying debts are written off and you can begin rebuilding your financial life. The DRO remains on your credit file for 6 years from when it was granted. During this period, access to mainstream credit, mortgages, and finance is very limited. After 6 years, the DRO drops off automatically. Most people start rebuilding credit immediately after completion using a credit builder card and ensuring all remaining bills are paid on time.
What is the difference between a DRO and bankruptcy?
A DRO costs £90, is for debts under £30,000 and assets under £2,000, and concludes in 12 months. Bankruptcy costs £680, has no debt upper limit, and may involve selling assets. Both appear on the Insolvency Register and stay on your credit file for 6 years. For people who qualify, a DRO is typically preferable due to lower cost and fewer asset implications.
Disclaimer:This article is for informational purposes only and does not constitute legal or financial advice. DRO eligibility criteria and rules can change. Always seek free advice from an approved DRO intermediary such as StepChange or Citizens Advice before applying.