What Happens After a Debt Relief Order?
A Debt Relief Order (DRO) is a debt solution for people with little or no assets and less than £20,000 debt if they live in England or Wales, and £15,000 in Northern Ireland. It freezes your debts for 12 months if you meet the eligibility criteria, after which your debt could be written off, allowing you to have a fresh start. But how does this work? What happens after the 12 months, and is there anything you need to do?
Your Debt Written Off
If you successfully complete a DRO, and your circumstances do not change, the debts listed in your DRO are written off. There is no official letter or documentation that notifies you when this happens, so make sure you know when your DRO started and when it is expected to end.
If you aren’t sure what these dates are, you can check your entry in the Insolvency Register to find out. There you should find the end date of your DRO period. It is a good idea to print off a copy because your entry will eventually be removed and you might need proof that you have been in a DRO and that it was completed. The deadline for printing off a copy is 3 months after your DRO has ended.
You should use this as evidence for any creditors who don’t accept that you no longer have an active debt with them because it was written off as part of a DRO. Don’t worry if you missed the deadline to get proof of your DRO, you can refer any creditors to the Insolvency Service’s DRO Team who should be able to confirm the existence of your DRO.
Having Your DRO Revoked
Generally, the DRO lasts 12 months. But your DRO can be revoked before that if your circumstances change. A change in your circumstances might include:
- An increase in your income which increases your surplus income to over £50 a month
- A decrease in your expenditure which increases your surplus income to over £50 a month
- Gaining an asset which is worth more than the DRO allows, such as through an inheritance
- Moving home, particularly to Scotland where the DRO is not an available
Your DRO may also be revoked if you fail to comply with the restrictions and rules put in place by the Official Receiver. This might include:
- Lying on your application
- Giving away assets before applying, or selling at less than their value, to become eligible
- Showing preferential treatment to a lender, such as a family member or friend
- Withholding information about an improvement in your circumstances
- Taking on debts before your DRO that you were fully aware you could not, and would not, repay
- Failing to disclose that you have a DRO to someone you do business with, a potential lender, or any other entity that the DRO specifies must be made aware
- Working as a company director, in some public office roles, and running a business under a different name
- Not complying with the requests of an Official Receiver
The penalty for breaking many of these rules and restrictions can be severe. You may be subject to a Debt Relief Restriction Order – a court ordered debt solution which restricts you for a further 15 years. Further failure to comply with a DRRO may result in a fine, and even prison.
Your Future after a DRO
Now that most, if not all, of your debts have been written off, you are ready to start fresh. This is an exciting time for many people, so here is some advice about how best to become financially responsible and secure.
- Keep on Budgeting
Living with a DRO often helps people learn how to budget because they need to live within their surplus income. But, it doesn’t stop here. Keep developing those budgeting skills and improve your financial education with helpful online tools. These are skills that are helpful whether you are in debt, or just want to make their money go a bit further.
- Make Some Financial Goals
There is nothing to stop you setting some financial goals while you are in your DRO, but if you haven’t started yet, now is great opportunity. We advise that your first financial goal should be a financial emergency fund. What happens if your boiler breaks? What happens if you lose your job? Would you become dependent on credit again? Set aside as much of your surplus income as you can every month until you have a healthy cushion, should something awful happen. After you have this security, other great savings goals might be a nice holiday, a new computer, a car, or even a house!
- Rebuild That Credit Score
If you are planning a big financial goal, like a house, it is likely that you will need to take out credit again in the future. Don’t worry, it is possible to take out credit in a financially healthy way, but you might need to improve your credit score first. Your credit score tells potential lenders how trustworthy you are, and if you have been in problem debt, your credit score is likely to be quite low.
Simple things like ensuring you are on the electoral role can improve your credit score, but you might also want to consider taking out a credit card. Using a credit card in a responsible manner can prove to lenders that you know how to handle money and that you will pay them back. Never take out more than you know you can repay, and pay the bills off entirely as soon as you get them. If you are at all unsure, seek help from an advisor or online. There are lots of ways to improve your financial future, you’ve just got to know how!