Debt Relief Restriction Order

Debt Relief Orders (DROs) are aimed at those on a low income (less than £50 a month left after essential expenditure such as rent and bills), with up to £15,000 of unsecured debt. Once the order is in place, no further payments to creditors are made by the debtor and it lasts for 12 months. If at the end of this period, the individuals financial circumstances have not changed, then the debt is cleared.

When is a Debt Relief Restriction Order imposed?

As there are quite strict criteria in order to be eligible for a DRO, it is important that the applicant is accurate and honest both during the application process, and also when the DRO has been approved. If the Official Receiver believes the applicant has acted unlawfully in their application, for example hiding documents in order to increase the likelihood of the DRO being approved, then they can apply to the court for a Debt Relief Restriction Order (DRRO). If the court finds in favour of the DRRO, then certain restrictions will be placed on the individual for a period of between 2 and 15 years.

Restrictions

The restrictions generally will be the same as those imposed under the Debt Relief Order, however where the DRO lasts for a period of 12 months, the DRRO could last up to 15 years, which can have a significant impact on the individual in a number of ways:

• Future Credit. As in a DRO, the debtor cannot apply for credit of more than £500 without disclosing the DRRO to the lender. Furthermore, the DRRO will be logged on the individual's credit file at least for the period of the order, and usually for 5 years after the order has finished.
• Impact on work life. As with Bankruptcy, any individual in a DRRO will not be able to act as a Company Director, nor can they have any involvement at all with the promotion of an existing company, or the formation of a new one while the order is in place. The individual is also unable to be the receiver or manager of a company on behalf of debenture holders.
• Business Impact. An individual in a DRRO may not enter any business transactions in a name that is different to the one the order was enforced in without disclosing to all parties that information.
• Future Roles. An individual in a DRRO cannot work as an Insolvency Practitioner while the DRRO is in place. Nor can they become a member of the Houses of Parliament. It is possible that there may be similar restrictions with other roles.

Breaking the restrictions.

If an individual in a DRO breaks any of the restrictions imposed, then it would be a criminal offence and could face a fine or imprisonment. Where an individual has had involvement with a company (as above) they will be held responsible for any debts accrued by the company in that time.

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