A DRO is a Debt Relief Order. It’s a new form of insolvency that was introduced in April 2009 to help people who live in England and Wales overcome serious debt problems if they really need the benefits of insolvency – but can’t afford to enter bankruptcy. After all, bankruptcy isn’t the only form of insolvency anymore – people in England and Wales (as well as Northern Ireland) might be able to enter an IVA (Individual Voluntary Arrangement) if they need to enter insolvency.

Unlike bankruptcy, which can cost £700 to enter, applying for a DRO costs just £90. This can only be done through an Approved Intermediary. Your fee would have to be paid to the Official Receiver before your application would even be considered.

It works like this: if someone enters a DRO, a ‘moratorium’ will be declared on their unsecured debts for 12 months. They won’t have to make any payments towards their debts in this time, and if their situation hasn’t improved by the end of their DRO, their unsecured debt will be written off. If you’d like some more information on DROs, you could visit the DebtAdviceNow.co.uk website.

While their DRO is going on, their unsecured lenders won’t be allowed to take any legal action against them. However, entering a DRO will have a serious effect on their credit rating – and their name and details will be registered in the Insolvency Register. DROs aren’t available to just anyone. If you’d like to enter a DRO, you’d have to meet certain criteria, such as:

• You’d have to be unable to repay your debts
• Those debts mustn’t be over £15,000
• Your total assets can’t be worth over £300
• Your monthly disposable income would have to be under £50
• You mustn’t be involved in any other formal insolvency procedure when you apply for a DRO.

So DROs are not available to homeowners, as the value of their property would certainly take them over the £300 limit on the value of their assets.