In April 2009, the Government introduced the Debt Relief Order (DRO). In the third quarter of 2009, 4505 of the record 35242 people who became insolvent took a DRO (as opposed to bankruptcy or an IVA). But what is a Debt Relief Order and who is eligible for one?

Essentially, it is an order issued by the Insolvency Service. You can apply for one when you simply cannot afford to pay your debts. The DRO lasts for 12 months, during which you make no payments towards the listed debts unless your financial situation improves. At the end of the 12 months, you are deemed free of all the debts listed on the Debt Relief Order.

In theory, it seems like a perfect solution for consumers struggling to meet payments. However, given its relatively short lasting period of time and the fact that you are required to make no payments, it does have tight eligibility criteria. It really is designed for those who absolutely cannot afford to pay their debts. To be eligible for a Debt Relief Order:-

-          Your debts must be less than £15000 in total.

-          The total value of your assets must be no more than £300.

-          You must not own a car worth more than £1000.

-          Your spare income, after paying bills and household expenses, must be no more than £50 each month.

During the period of the Debt Relief Order, you will have to inform the Insolvency Service of any change to your income. If you find yourself in a better financial situation, you may be required to make payments.