Pillar Guide · Updated July 2026

UK Debt Relief Order (DRO): A Practical Guide for 2026/27

A Debt Relief Order is the cheapest and simplest form of personal insolvency in England and Wales, designed for people with modest debts, few assets and very little spare income. This pillar guide explains who qualifies in 2026/27, the £90 fee, the 12-month moratorium that leads to debts being written off, which debts are excluded, how a DRO differs from an IVA or bankruptcy, and the six-year impact on your credit file.

Last updated: 1 July 2026Last reviewed: 1 July 2026How we verify

What Is a Debt Relief Order

A Debt Relief Order (DRO) is a formal insolvency procedure available in England and Wales for people whose debts are too large to clear through normal budgeting but who lack the assets or income to justify the cost and disruption of bankruptcy. Introduced in 2009 and administered by the Insolvency Service, a DRO places a 12-month freeze on named debts. Provided your circumstances do not materially improve during that period, the debts are then written off entirely and you owe nothing further to those creditors.

DROs were created specifically to fill the gap for people on very low income — often those relying on benefits, in insecure or zero-hours work, or with health conditions limiting earning capacity — who had no realistic prospect of ever repaying unsecured debt but whose situation did not warrant a full bankruptcy with its court involvement and higher fee.

Around 20,000-30,000 DROs are approved each year in England and Wales. The process is entirely online and, unlike bankruptcy, does not involve a court hearing — the Official Receiver processes the application administratively once submitted by an approved intermediary.

Eligibility Criteria

To qualify for a DRO you must meet all of the following tests at the point of application:

Test	Limit
Total qualifying debt	£50,000 or less
Total assets	£2,000 or less (some vehicles disregarded up to £4,000)
Disposable income after expenses	£75 a month or less
Residency	Lived or worked in England or Wales in past 3 years
Prior insolvency	Not currently in a DRO, IVA or bankruptcy

The £2,000 asset limit is strict and catches many applicants out — savings, valuable possessions, and any equity in property all count. A car is generally disregarded up to £4,000 in value if it is reasonably needed for work, caring responsibilities or a disability, but a second vehicle or a car worth more than this threshold will usually push you over the limit.

The £75 monthly disposable income figure is calculated after deducting reasonable household expenses (rent, utilities, food, childcare, minimum debt repayments already being made) from net income. An approved intermediary completes a standardised income and expenditure assessment to determine this figure precisely — self-assessment is not accepted.

How to Apply

You cannot apply for a DRO directly — the application must be made through an approved intermediary, a debt adviser authorised by the Insolvency Service to submit DRO applications. Free options include StepChange, National Debtline, Citizens Advice and PayPlan; some fee-charging insolvency practitioners also offer the service, though free advice is widely available and recommended first.

The intermediary will: verify your identity; complete a full income and expenditure assessment; list all your debts and creditors; check the £2,000 asset limit; confirm eligibility against all criteria; and submit the online application to the Insolvency Service alongside the £90 fee.

Processing is typically fast — many DROs are approved within a few days of submission provided the application is complete and accurate. Once approved, your name appears on the public Individual Insolvency Register and the 12-month moratorium begins immediately.

The 12-Month Moratorium

From the date of approval, a 12-month moratorium protects you from any enforcement action by the creditors listed in the DRO. They cannot call, write demanding payment, start court proceedings, apply for a charging order against your home, or send bailiffs. You make no payments toward the included debts during this period.

At the end of the 12 months, provided your financial situation has not significantly improved (for example through a substantial pay rise, redundancy payout, inheritance or lottery win reported to the Official Receiver), the qualifying debts are automatically discharged — written off in full, with no further liability.

If your circumstances do improve materially during the moratorium, you have a legal duty to inform the Official Receiver. Depending on the scale of the change, your DRO may be revoked (returning you to full liability for the debts) or, in modest cases, simply left to run its course.

Debts That Cannot Be Included

Most everyday unsecured debt qualifies — credit cards, overdrafts, personal loans, payday loans, store and catalogue credit, utility arrears, benefit overpayments and rent arrears. Certain debts, however, are excluded by law and remain payable in full regardless of the DRO:

Court fines and confiscation orders
Child maintenance arrears
Student loans
Social Fund loans (from the DWP)
Debts arising from fraud
Some categories of TV licence arrears prosecuted as a criminal matter

Because student loans are excluded, a DRO does not touch this common source of debt for younger applicants — repayments continue as normal through the tax system under whichever plan applies. An intermediary will identify the mix of included and excluded debt before recommending a DRO, since a heavily excluded-debt profile may make the process less useful than expected.

Credit File and Public Register Impact

A DRO is recorded on your credit report with all three main credit reference agencies (Experian, Equifax, TransUnion) for six years from the date of approval — regardless of whether the DRO itself only runs for 12 months. During those six years, most mainstream lenders will decline mortgage, credit card and loan applications, and interest rates on any credit you do obtain will be higher.

Your details (name, address, date of birth, DRO case number) also appear on the public Individual Insolvency Register for 15 months from approval. This register is searchable online by anyone, including some employers, landlords and financial institutions conducting checks, which is a consideration for people in certain regulated professions or seeking to rent privately during that window.

DRO vs IVA vs Bankruptcy

The three main personal insolvency routes in England and Wales suit different situations:

DRO: debts under £50,000, assets under £2,000, disposable income under £75/month. £90 fee. No court hearing. Debts written off after 12 months.
IVA: for those with regular disposable income who can afford agreed monthly payments (typically over 5-6 years) toward a portion of larger debts, while usually keeping their home. No fixed debt ceiling; fees are built into the arrangement and paid from contributions.
Bankruptcy: £680 court fee, suited to unmanageable debt of any size, particularly where there are more valuable assets to be realised for creditors or the DRO ceiling is exceeded. Typically discharged after 12 months, though asset realisation can take longer.

A qualified debt adviser will assess your income, assets and total debt to recommend the most appropriate route — the cheapest option (a DRO) is not always available, and the most drastic (bankruptcy) is not always necessary.

Life After a DRO

Once your qualifying debts are written off at the end of the moratorium, you owe nothing further to the creditors named in the order. You remain responsible for any excluded debts (student loans, court fines, child maintenance) that continue as before. Rebuilding your credit file typically starts with a basic bank account, a low-limit credit builder card used sparingly and paid off in full each month, and staying on the electoral roll to help lenders verify your identity.

Many people successfully obtain mainstream mortgages and standard credit again within a few years of the DRO ending, though the six-year mark on the credit file is the point at which the record is fully cleared and applications are assessed without reference to the DRO at all.

Official References

FAQs

What is a Debt Relief Order?

A Debt Relief Order (DRO) is a low-cost form of insolvency for people with relatively small debts, few assets and low disposable income. It is administered by the Insolvency Service, not the courts, and applied for through an authorised debt adviser (not directly by the debtor). Once granted, most of your debts are frozen for 12 months and, provided your circumstances do not improve, written off entirely at the end of that period. It is designed for people who cannot realistically pay off their debts but do not have enough assets or income to make bankruptcy proportionate.

What are the eligibility limits for a DRO in 2026/27?

To qualify you must: owe no more than £50,000 in total qualifying debt; have no more than £2,000 in assets (a car worth up to £4,000 is generally disregarded if it is needed for work or disability reasons); have disposable income of no more than £75 a month after reasonable household expenses; have lived or worked in England or Wales in the past three years; and not already be in a DRO, IVA or bankruptcy. These limits are set by the Insolvency Service and reviewed periodically — always confirm current figures with a debt adviser before applying.

How much does a DRO cost?

The DRO application fee is £90, payable in one lump sum or in instalments to the approved intermediary before the application is submitted — there is no fee waiver. This is far cheaper than bankruptcy, which costs £680, and has none of the ongoing costs an IVA carries. The £90 fee is paid once, at the point of application, and is not refundable if the application is refused.

Show 7 more questions

Who can apply for a DRO on my behalf?

You cannot apply for a DRO yourself directly to the Insolvency Service — the application must go through an authorised debt adviser known as an "approved intermediary", typically at a free debt charity such as StepChange, National Debtline, Citizens Advice or PayPlan, or a fee-charging insolvency practitioner. The intermediary assesses your eligibility, helps complete the online application and submits it. This safeguard ensures applicants get proper advice and that DROs are not used inappropriately.

What happens during the 12-month moratorium?

Once your DRO is approved, a 12-month moratorium period begins. During this time, none of the creditors named in the order can take any action to recover the debt — no calls, letters, court claims, charging orders or bailiffs. You do not have to make any payments toward the included debts. If your financial circumstances do not significantly improve during the moratorium (for example, a large pay rise, inheritance or lottery win), the debts included in the DRO are written off completely at the end of the 12 months.

Which debts can and cannot be included in a DRO?

Qualifying debts include credit cards, personal loans, overdrafts, utility arrears, catalogue debts, payday loans, benefit overpayments and rent arrears. Debts that cannot be included are: court fines, child maintenance, student loans, Social Fund loans, TV licence arrears in some cases, confiscation orders and debts arising from fraud. If a significant portion of your debt is student loan or court fines, a DRO may leave much of your problem debt untouched, so a debt adviser will check the mix before recommending this route.

How does a DRO affect my credit file?

A DRO is recorded on your credit file for six years from the date it is approved, regardless of how quickly it is completed — this is longer than a DRO's own 12-month life but the same six-year period that applies to a default. During those six years you will find it very difficult to get mainstream credit, including most mortgages, and many lenders will decline applications outright. The Insolvency Register also lists your DRO publicly (name, address, case number) for 15 months after approval, which can be searched by anyone including some employers and landlords.

Can I get a DRO if I own my home?

Generally no. Home ownership with any meaningful equity is likely to breach the £2,000 asset limit, making a DRO unavailable — the Insolvency Service treats equity in property as an asset even if you cannot easily realise it. Renters and those with no housing equity (for example, in negative equity or with a shared-ownership stake below the threshold) are the typical DRO applicants. Homeowners with debt problems are usually directed toward an IVA or, in serious cases, bankruptcy instead.

What if my circumstances change during the moratorium?

You must inform the Official Receiver (via the Insolvency Service) of any significant change in your income, assets or circumstances during the 12-month moratorium — for example, a new job with higher pay, an inheritance or winning money. If the change means you no longer meet the eligibility criteria, your DRO can be revoked, and creditors regain their right to pursue you for the debts. Minor increases in income that keep you within the £75 disposable income threshold do not usually cause a problem, but you have a duty to disclose changes honestly.

Is a DRO better than an IVA or bankruptcy?

It depends entirely on your circumstances, and this is exactly why an approved intermediary must assess you first. A DRO suits low-income, low-asset, low-debt (under £50,000) situations and is far cheaper and less disruptive than the alternatives. An IVA suits people with some disposable income who can make agreed monthly payments over 5-6 years to clear a portion of larger debts while keeping assets like a house. Bankruptcy suits people with unmanageable debt of any size where assets will likely be sold to repay creditors, or where a DRO's £50,000 ceiling is exceeded. None of the three is inherently "better" — the right choice depends on your income, assets and total debt.

Related Calculators

Debt Payoff

Plan repayment or check affordability

Budget Planner

Work out disposable income

Take-Home Pay

Net pay after tax & NI

Income Tax

Annual tax on earnings

Calculators for this topic

Credit Card Payoff tool

Find out how long it will take to pay off your credit card balance.

Loan tool

Calculate monthly loan repayments, total interest and cost of borrowing.

Budget Planner Calculator

Plan your monthly budget by entering income and expenses across all categories to see your surplus or shortfall.

State Pension Forecast Calculator

Forecast your UK State Pension based on qualifying NI years and model the impact of filling gap years with voluntary Class 3.

About the author

Emma Clarke

UK Tax Writer

Emma Clarke has been writing about UK personal tax since 2018, with a particular focus on Self Assessment, PAYE coding and the practical mechanics of how HMRC actually applies the rules to ordinary salaries. Her work concentrates on translating the dense language of HMRC manuals and Finance Act schedules into worked examples that show, pound by pound, how income tax and National Insurance reduce a gross salary to the figure that lands in a UK bank account. Emma covers the full PAYE lifecycle: tax codes (1257L, BR, K codes, emergency codes), the Marriage Allowance, the High Income Child Benefit Charge, salary sacrifice arrangements and their effect on pensionable pay, the Apprenticeship Levy, and the differences between the rUK and Scottish income-tax regimes. She is particularly interested in the edge cases that catch PAYE employees out — the £100,000 personal-allowance taper, the 60% effective marginal rate it creates, and the interaction between student-loan plans and pension contributions. Every figure in Emma's articles is verified against the current HMRC rates pages and worked through a Self Assessment calculation by hand before publication. She writes to CalcHub's editorial standards: primary-source citations, plain English, no promotional language, and clear "this is general information, not financial advice" disclaimers where appropriate.

Personal-finance writer since 2018
UK tax specialism — PAYE, Self Assessment, National Insurance
Writes to CalcHub editorial standards (primary-source citation, annual review)

income-taxself-assessmentpayenational-insurancetax-codessalary-sacrificestudent-loansscottish-income-tax

Disclaimer: Insolvency eligibility thresholds and fees can change. Figures here reflect the position in 2026/27. Always check gov.uk and seek advice from a free, government-approved debt adviser before applying for a Debt Relief Order.