Debt Relief Orders (DROs) are an alternative solution to bankruptcy for those who have found
themselves in debt and are struggling to repay. Unlike many of the alternatives, such as
Individual Voluntary Agreements (IVAs), DROs are specifically aimed at those on a low income
and who have no significant assets that could be used to repay some of the debt.
While there are clear advantages of DROs to those that are eligible, as with any debt solution,
it is important to consider the potential impact such an order may have on an individual.
As with Bankruptcy and Individual Voluntary Agreements (IVAs), DROs are listed on the
individual’s credit record for a period of 6 years. This may have implications should the
individual wish to apply for more credit in the future, or indeed apply for a mortgage.
Landlords will also sometimes request a credit check before a new tenant moves into a property.
Publicly Available Records
A DRO is also listed on the Insolvency Register, which is available to the public. It will
remain there usually for a period of 15 months (3 months in addition to the 12 months a DRO
usually lasts for). While it is unlikely, it is possible that family or friends could find out
about the DRO through the Insolvency Register, which maybe something the debtor wishes to avoid.
Whilst in a DRO, the individual may not obtain credit of more than £500 without explaining
the situation to the lender. This is also the case with alternatives to a DRO such as an IVA.
Work and Business implications
While an individual is subject to a DRO, they are unable to trade or conduct business in any
name different to that which the DRO was applied. It is also not possible to become a Company
Director, nor form or be involved with the formation and management of a limited company
without the permission of the court during the duration of the DRO.
It is also possible that, where the court believes the debtor is dishonest, (eg lying on the
original application for a DRO) or if they believe them to be at fault for the debt they are in
and are likely to return to debt, a Debt Relief Restrictions Order may be applied. This would
extend the restrictions of the DRO for up to 15 years.
While the key disadvantages may not affect the majority, they are always worth considering as
circumstances can change, even for the better. Anyone considering a DRO and would like further
advice relating to the benefits and potential disadvantages should always discuss their situation
with a licensed money advisor or from one of the free advice services such as the Citizens Advice
Bureau (CAB), National Debtline or the Consumer Credit Counselling Service (CCCS).