What is a debt relief order?

When debt feels overwhelming, it can be hard to know where to turn. Letters pile up, calls keep coming, and the stress can affect every part of your life. For people on a low income, with limited assets, and smaller debts, a debt relief order (DRO) may provide a way forward and a real chance to reset.

This guide explains what a debt relief order is, how it works, and who qualifies, as well as the benefits and risks to consider before applying. We’ll also explore how DROs compare to other debt solutions like IVAs, and where you can find free, confidential advice before making any decisions.

In this guide: 

• What is a debt relief order?
• Debt relief order criteria: Who can apply?
• How does a debt relief order work?
• What debts are (and aren’t) covered?
• Benefits and risks of a DRO
• DROs vs IVAs: What’s the difference
• Key takeaways and where to get help

What is a debt relief order?

A debt relief order (DRO) is a type of insolvency arrangement available in England, Wales, and Northern Ireland. It’s designed for people on low incomes with debts they can’t realistically repay.

If approved, a DRO can give you a 12-month break from most of your creditors. During this time, they can’t contact you or take action. If your financial situation doesn’t improve within that year, the debts included in the DRO are written off entirely.

Think of it as a legal ‘pause and reset’ – protecting you from creditor pressure while giving you a fresh start if repayment isn’t possible.

Debt relief order criteria: Who can apply?

To qualify for a debt relief order, you need to meet certain criteria. As of June 2024, the rules are:

• Your total debts are £50,000 or less
• You have £75 or less spare income each month after essentials
• You don’t own a home
• Your total assets are worth £2,000 or less (a car up to £2,000 is usually allowed)
• You live or have recently lived in England, Wales or Northern Ireland
• You haven’t had a DRO in the last six years

Importantly, DROs are now free to apply for. The previous £90 fee was abolished in April 2024, making them more accessible.

How does a debt relief order work?

• You’ll speak to an approved intermediary (often via StepChange or Citizens Advice)
• They’ll check if you meet the criteria and prepare your application
• Your application is sent to the Insolvency Service, who make the final decision
• If approved, creditors are informed and you get 12 months of breathing space
• At the end of that year, if your circumstances haven’t improved, your eligible debts are cleared

Restrictions during a debt relief order

While under a DRO, you must follow certain rules:

• You can’t borrow more than £500 without telling the lender you’re in a DRO
• You can’t act as a company director
• Your name will be listed on the public Insolvency Register

These restrictions end once the DRO period finishes.

What debts are (and aren’t) covered?

Most unsecured debts can be included in a DRO, such as:

• Credit cards, loans, overdrafts, and payday loans
• Short-term loans
• Rent or council tax arrears
• Gas, electricity and water arrears

However, not all debts qualify. A DRO will not cover:

• Student loans
• Court fines
• Child maintenance arrears
• Secured debts like mortgages or hire purchase
• TV licence arrears

If your biggest debts are in the ‘not covered’ list, a DRO may not be the best option. This is when other solutions like debt management plans (DMPs) or individual voluntary arrangements (IVAs) could help.

Benefits and risks of a DRO

Like any debt solution, a DRO has both positive aspects and some potential drawbacks.

Potential benefits

• Free to apply: No upfront cost
• Creditor protection: No calls, letters, or legal action while it’s in place
• Debts written off: After 12 months, your eligible debts are potentially wiped
• Fresh start: Gives people on low incomes a chance to rebuild

Potential risks

• Credit impact: DROs stay on your file for up to six years, limiting access to credit
• Public record: Your details appear on the Insolvency Register
• Restrictions: Can’t borrow freely or take certain jobs during the DRO
• Eligibility limits: Unsuitable if you own property, have high-value assets, or more than £50,000 of debt

DROs vs IVAs: What’s the difference?

A common question is the difference between a debt relief order and an individual voluntary arrangement (IVA).

• DRO: For smaller debts (up to £50,000), low income, no assets. It lasts 12 months and then debts are written off.
• IVA: Used to help resolve larger debts, an IVA is a formal agreement with creditors to repay part of what you owe over five to six years over regular repayments.

To learn more, read our guides on debt management plans and loans and individual voluntary arrangements.

Debt relief order FAQs

Do you have to pay back a debt relief order?

No. If your financial situation hasn’t improved after 12 months, the debts included in your DRO are written off.

How long does a debt relief order last?

The order itself lasts 12 months, but it stays on your credit file for up to six years.

How long does a debt relief order take to process?

Once submitted, applications usually take around 10 working days to be approved.

What happens if my income improves during a DRO?

You must inform the Insolvency Service. Your DRO may be cancelled if you’re able to make repayments, but you can then explore other solutions like a DMP.

What’s the difference between a DRO and an IVA?

A DRO clears debts after a year if you’re on very low income. An IVA is a longer-term repayment plan for people with higher debts.

Key takeaways and where to get help

A debt relief order is designed for people on low incomes with debts under £50,000 and few assets. It’s now free to apply for and lasts 12 months.

After that, included debts are written off – but remember it stays on your credit record for six years. A debt relief order may not be the right choice for everyone, so it’s important to seek free independent advice before applying. Alternatives like IVAs, DMPs, or bankruptcy may be better suited in some cases.

If you’re struggling with debt, you don’t need to face it alone. Free, confidential help is available:

• StepChange – Debt advice and DRO applications
• Citizens Advice – Local and online support
• MoneyHelper – Government-backed guidance
• National Debtline – Freephone helpline and online chat

You can also explore our free support organisations list for more free and impartial resources for debt, mental health, and financial stress.