General

Restrictions

You must follow rules (called ‘restrictions’) if you are repaying your creditors via a DRO.

This means you cannot:

• borrow more than £500 without telling the lender about your DRO – whether you’re borrowing on your own or with someone else;
• Act as a company director;
• Create, manage or promote a company (unless granted permission by the court);
• Run a business with a different name without telling anyone you do business with about your DRO; plus
• If applying for a loan/overdraft you have to inform the bank/building society about the DRO.

The restrictions usually last 12 months. They can be extended if careless or dishonest actions caused your debt problem. For example, you lied to get credit.

 

Inclusive and Excluded Debts

Some debts are exempt and not included in the £20,000 ceiling (note this ceiling was due to raise to £30,000 in June 2021 but has been deferred due to the coronavirus pandemic), as such readers are recommended to check online for the latest allowances.

 

Debts that are NOT covered under the DRO: 

• Magistrates’ court and criminal fines;
• Debts owed to the Child Support Agency or Child Maintenance Service;
• Student loans;
• Money owed under a 'criminal confiscation order;
• Debts from certain personal injury claims against you;
• TV licence arrears;
• Loans from the DWP Social Fund, such as budgeting loans; and
• Debts that have been taken out fraudulently, including benefit overpayments that have occurred as a result of fraud.

 

What type of debts can be included?

• Rent arrears;
• Utility debts;
• Phone arrears;
• Council tax;
• Credit cards;
• Bank overdrafts and loans;
• Finance company loans;
• Arrears on hire purchase agreements;
• Parking penalty charges; and
• Mortgage shortfalls (this is where you owe your lender the loss between sale and mortgage, such as when the house is repossessed).

If you are going down the DRO route then our advice is simple – include everything, the approved intermediary will determine what is applicable.

 

Can a creditor object

Your approved intermediary will contact your creditors and request that their debt be included in a DRO arrangement. Creditors can object to this, but any objections must take place within thirty days. They may take the time to question the validity of your claim and question whether their debt should be included in the arrangement. Creditors may also have a bankruptcy petition awaiting a formal hearing date. 

They can cite four reasons for objection: -

• Incorrect information on the DRO;
• That you have a current bankruptcy order which is pending discharge;
• That you have an existing IVA (or have applied for one); or
• Or that you do not meet the legal conditions for making a debt relief order under the Insolvency Act 1986.

 

How we can help

Lestons can assist you to design a solution to your debts, we can, if instructed appoint one of our excellent third-party independent financial advisors who can look at the situation and advise whether a DRO is your best option. Please note we make no commission from these referrals but do need clients to open a case so that we can prepare a financial brief for them. To gain our assistance you need to open a case, this is done by simply clicking on the link at the top of the page, you will then need to deposit a sum equal to one hour’s usage, upon receipt of these funds you will be assigned your personal caseworker who will telephone you to discuss the matter and make suggestions on how to proceed.

Please note your caseworker can only give generic advice, their role is to prepare your details for handling by our appointed financial advisor and to act as your point of contact, they will also issue you with your Password and PIN, these will be needed to log onto your client dashboard. From your dashboard you will be able to manage and view every aspect of your case, upload documents, images, files etc.