Debt Advice Handbook (13th edition)Chapter 15: Personal insolvency 6. Debt relief orders
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6. Debt relief orders
A debt relief order (DRO) gives the client a 12-month moratorium, during which time the creditors specified on the order cannot force the client to pay those debts.1For an overview, see M Gallagher, ‘Debt Relief Orders’, Adviser 132 Following the moratorium, the client is discharged from all the debts included in the order (other than those incurred fraudulently).
Although it is more than 10 years since the DRO solution was introduced, practice is continually evolving. The DRO Toolkit is an essential resource for both advisers and approved intermediaries and is available on AdviserNet (for Citizens Advice advisers and intermediaries) and on the Institute of Money Advisers (IMA) and Wiseradviser websites2wiseradviser.org (for other advisers and intermediaries). The monthly bulletins and articles published by the Shelter Specialist Debt Advice Service regularly provide information and advice about DROs and IMA members can find these in the Networking and Information section of the IMA website (i-m-a.org.uk). Non-members can sign up for these at debtquality.org.uk and this includes archived issues. In 2019, the Insolvency Service published the first version of the DRO A–Z Guidance which sets out technical matters. From 29 June 2021, this has been replaced by Debt Relief Orders: Guidance for Debt Advisers which is published in the Debt Adviser Tools and Information section of the Insolvency Service website and is available online at: gov.uk/guidance/debt-relief-orders-guidance-for-debt-advisers. The Insolvency Service has also published Intermediary Guidance Notes which contain information about the roles of the Insolvency Service and approved intermediaries as well as guiidance on completing the DRO application form (at the time of writing, version 17.0 is due to be published) available at: gov.uk/guidance/debt-advisor-tools-and-information. These can be obtained from your agency’s competent authority.3See also Considering some of the challenges for an Approved Intermediary in the Enquiry of the month section of the SDAS e-bulletin, July 2020
 
1     For an overview, see M Gallagher, ‘Debt Relief Orders’, Adviser 132 »
2     wiseradviser.org »
3     See also Considering some of the challenges for an Approved Intermediary in the Enquiry of the month section of the SDAS e-bulletin, July 2020 »
Debt relief orders and bankruptcy
DROs have a lot in common with bankruptcy, but there are significant differences.
    •The cost to the client of applying for a DRO is considerably less than the cost of applying for a bankruptcy order.
    •The client can apply for a bankruptcy order on her/his own, but needs the assistance of an intermediary in order to apply for a DRO.
    •Creditors can object to a DRO being made, but cannot object to a bankruptcy order being made on a debtor’s bankruptcy application.
    •There is no maximum debt level for a bankruptcy order and no preconditions on income or assets.
    •If the client has entered into a transaction at an undervalue or given a preference within the prescribed period, this may be set aside by the trustee in bankruptcy, but could prevent the client from obtaining a DRO. On the other hand, there is no provision for the official receiver to set aside such a transaction if a DRO has been made.
    •There is no provision for revoking a bankruptcy order on the grounds that the client’s financial circumstances have improved prior to discharge.
    •Assets do not vest in the official receiver, and so a DRO does not involve any realisation of assets or require clients to make any payments to their creditors.
    •Contingent liabilities cannot be included in a DRO.
    •A DRO only releases the client from the debts included in the application. Bankruptcy releases the client from her/his ’bankruptcy debts’ (see here), whether or not they are listed in the statement of affairs.
Who can apply for a debt relief order
A client who is unable to pay her/his debts and who meets the eligibility conditions (see here) can apply for an order in respect of her/his ‘qualifying debts’.
Qualifying debts
Any secured debt is not a qualifying debt. Otherwise, any debt for an identifiable sum which is not excluded qualifies for a DRO. ‘Excluded debts’ are:
    •fines (including compensation, but not the criminal courts charge; the Insolvency Service DRO Team has now accepted that costs orders made against the client by the court and treated as payable under a conviction fall within the definition of ‘fine’ and are, therefore, not qualifying but excluded debts) and confiscation orders. This does not include costs of enforcement – eg, bailiffs’ charges;
    •child support assessments and maintenance orders;
    •student loans;
    •damages for personal injury or death arising out of negligence, nuisance or breach of contractual, statutory or other duty;
    •social fund loans.
Issues with particular types of debt
Business debts
Business debts are ’qualifying debts’ for the purposes of a DRO, provided the client is personally jointly or severally liable for them.1For a full discussion of issues relating to self-employed clients, see L Charlton, ‘Debt Relief Orders and the Self-employed’, Adviser 155
Contingent liabilities
Unlike in bankruptcy, contingent liabilities are not qualifying debts because they do not fit the definition of a qualifying debt as being ’a liquidated sum payable either immediately or at some certain future time’.2s251A(2)(a) IA 1986
Credit union debts
Credit union debts are considered as secured debts to the extent of the value of the client’s shares. If the debt exceeds their value, the excess is a should be included in the DRO as an unsecured debt and the balance as a secured debt. The value of the client’s shares should not be included as assets if these have been assigned to the credit union. The full amount of the debt counts towards the debt limit (see here).
Foreign debts
Debts owed to overseas creditors should be included. Although the client is protected from enforcement action by the creditor in England and Wales, the DRO may not be recognised in other countries, including European Union states and Scotland (which has its own legal system). The client may therefore face enforcement action in countries outside England and Wales, even after s/he has been released from liability for the debt in England and Wales.
Fraudulent debts
Unless otherwise specifically excluded (see here), debts incurred through fraud are qualifying debts which count towards the DRO debt limit (see here) and which must, therefore, be included in the application. Voluntary payments made by the client towards a fraudulent debt or its full repayment must be reported as a preference but not - eg, payments made by deduction from benefits, as such payments cannot be classed as ‘voluntary’. The client is protected from enforcement action from her/his creditors during the moratorium period (see here), but is not released from liability for such debts at the end of this period (see here). This means that benefit providers cannot make any deductions from benefit during the moratorium period even if the overpayment is fraudulent.
Guarantors
If a client has a DRO, this does not release any guarantor (or any other person liable for the debt, such as a co-debtor) from her/his liability.
If the client is guarantor for someone else’s debt, her/his possible future liability under the guarantee is not a qualifying debt. There must be an actual liability to pay an amount, either immediately or at some certain time in the future. This means that, until the borrower defaults, the client has no liability. If the borrower has defaulted, check the terms of the guarantee to see at what point the guarantor becomes liable and whether s/he is liable for the outstanding balance owed to the creditor or just the missed payments.
Hire purchase agreements
If the agreement is in arrears, the amount due and unpaid must be included in the DRO. This includes the outstanding balance if this is due and payable under the terms of the agreement – eg, if it has been called in by the finance company.
If the agreement is in arrears but the outstanding balance is not due and payable, the arrears must be included in the DRO. The client can decide not to include the outstanding balance, if it is not due and payable (see above), but, it will still count towards the £30,000 total debt limit (see here). Check the terms of the agreement and any notices the client has received from the finance company to see whether the agreement contains any terms under which it could be terminated if the client enters into any formal insolvency procedure.
If there are no arrears, the client can choose not to include the debt in the application and s/he remains liable for the remaining payments. The outstanding balance does not count towards the £30,000 total debt limit (see here) provided:
    •the agreement is not in arrears;
    •the repayments are made by a third party where these are more than £75 a month; or
    •the repayments are deemed as an allowable expense (see here).
HMRC debts
These debts should be scheduled individually in the DRO application and not totalled up and scheduled as one total debt owed to HMRC.3See DRO News Special Bulletin, 29 January 2021
Motor Insurers’ Bureau claims
The official receiver says that any third-party claim which has either been settled by the Motor Insurers’ Bureau or is the subject of a judgment against the client is a liquidated sum. Any compensation for personal injury or death included in the claim is an excluded debt (see here). Any other types of claim (eg, for loss of earnings) are qualifying debts and should be included in the DRO (subject to the £30,000 total debt limit - see here).
Advance payments of universal credit
Advance payments of universal credit (UC) are not loans. Before making an advance payment, the client is given notice of her/his liability to repay it, usually by deductions from subsequent payments of benefit. The Insolvency Service has confirmed that any advance payment which has not been fully recovered at the date of the application for a DRO is a qualifying debt.
If deductions from benefit incorrectly continue after the date the DRO is made and these are subsequently repaid to the client, the official receiver does not regard these repayments as an increase in income or property for the purposes of revoking the order (see here).
Penalty charges
There are numerous penalty charge notices. Some of these are qualifying debts, some are excluded debts and others may be the subject of prosecution and a fine in the magistrates’ court as the potential consequences of non-payment. It is impossible to produce a comprehensive list of all the different penalty charges, but if the client discloses that s/he has an unpaid penalty charge, you should apply the following rules.4See L Charlton, ‘DROs and Penalties’, Adviser online, 13 August 2019
    •If the consequence of non-payment is that the penalty charge is recoverable as a civil debt or can be registered for enforcement as if it were payable under a county court judgment, the penalty charge is a qualifying debt and should be included in the DRO.
    •If the consequence of non-payment is that the penalty charge can be registered in the magistrates’ court for enforcement as if it were payable under a conviction, the penalty charge is a fine and is an excluded debt.
    •If the consequence of non-payment is that the client may be summonsed to the magistrates’ court and prosecuted for an offence, the penalty charge is a qualifying debt and so should be included in the DRO. Any subsequent prosecution is not regarded as a ‘remedy in respect of the debt’ and a conviction could lead to a fine which would be an excluded debt.5See L Charlton, ‘Q&A with the Shelter Specialist Advice Service’, Quarterly Account 49, IMA, pp26-27 Note: Penalty charges issued for breaches of the coronavirus legislation fall into this category.6Reg 10 Health Protection (Coronavirus, Restrictions) (England) Regs 2020 No.350 (or their Wales equivalent, SI 2020/353 (W.80). See also Spotlight, October 2020, Shelter Specialist Debt Advice Service
Unenforceable debts
In principle, all unpaid qualifying debts should be included in a DRO application and, unless the client owes money to a ’loan shark’ (see below), this is only an issue if the inclusion of the debt would take the client over the £30,000 total debt limit (see here).
The official receiver says that if an adviser has satisfied her/himself that a qualifying debt is unenforceable (eg, because it is ’statute-barred’ – see here) or is irredeemably unenforceable under the Consumer Credit Act 1974 (see here) and there is evidence that the debt is unenforceable (eg, a court order or letter from the creditor acknowledging this), the client can choose not to include the debt in the DRO and it does not count towards the £30,000 total debt limit.
A debt that has been written off arguably no longer fits the definition of a ‘qualifying debt’ (‘payable either immediately or at some certain future time’). The DRO Team has confirmed it agrees with this view and, provided the creditor has confirmed in writing that the debt will not be pursued, then the client can choose to omit the debt from the DRO application. However, if it later emerges the debt was not written off, then not only will the client remain liable to repay the debt but, if the amount takes the client’s total debts to more than the £30,000 debt limit, the DRO could be revoked.
Note: if the official receiver subsequently finds out that a debt was not statute-barred or unenforceable and, as a result, the debts exceeded the £30,000 limit, the DRO is revoked.
Debts owed to loan sharks (see here) can be included in a DRO. However, the official receiver has said that if the client fears for her/his safety, s/he can choose to leave the debt out and it does not count towards the £30,000 limit.
Water charges
If the client has an unmetered account, her/his water charges to the 31 March following the date of the DRO application are a qualifying debt and so must be included in the DRO. Most water companies have ’insolvency clauses’ in their charges schemes whereby, in the event of the customer entering a formal insolvency procedure (such as bankruptcy or a DRO), her/his water charges are apportioned up to the date of the DRO/bankruptcy order and the customer is then issued with a new bill for the remainder of the charging year to 31 March.
Although the client can choose to pay the new bill, the water company’s view can be challenged, both as an attempt to exercise a remedy in respect of the debt and to contract out of the statutory insolvency scheme.7See P Madge, ‘Deep Water’, Adviser 143 and ‘Deep Water 2’, Adviser 177 Specialist advice should be obtained in such cases.
 
1     For a full discussion of issues relating to self-employed clients, see L Charlton, ‘Debt Relief Orders and the Self-employed’, Adviser 155 »
2     s251A(2)(a) IA 1986 »
3     See DRO News Special Bulletin, 29 January 2021 »
4     See L Charlton, ‘DROs and Penalties’, Adviser online, 13 August 2019 »
5     See L Charlton, ‘Q&A with the Shelter Specialist Advice Service’, Quarterly Account 49, IMA, pp26-27 »
6     Reg 10 Health Protection (Coronavirus, Restrictions) (England) Regs 2020 No.350 (or their Wales equivalent, SI 2020/353 (W.80). See also Spotlight, October 2020, Shelter Specialist Debt Advice Service »
7     See P Madge, ‘Deep Water’, Adviser 143 and ‘Deep Water 2’, Adviser 177 »
Qualifying conditions
In order to obtain a DRO, the client must be unable to pay her/his debts and must either be domiciled in England and Wales at the date of the application or have been ordinarily resident or carried out business in England and Wales during the previous three years.1Clients who are not British citizens and who are considering applying for a DRO should be advised to consult an immigration solicitor first, as it may affect their immigration status and any application for British citizenship. In addition, on the date the official receiver determines the application (the ‘determination date’) s/he must not:
    •be an undischarged bankrupt, or subject to an individual voluntary arrangement (IVA), a bankruptcy restrictions order, a bankruptcy restrictions undertaking, a debt relief restrictions order or debt relief restrictions undertaking;
    •have had a DRO made within the previous six years (Note: if a client has been subject to a DRO within the previous 6 years that was revoked, s/he can apply for another DRO provided s/he currently meets all the other qualifying conditions);
    •have a bankruptcy petition pending against her/him, unless the court has referred her/him for a DRO;
    •have qualifying debts above the prescribed limit of £30,000 (this figure increased from £20,000 on 29 June 2021);
    •have surplus monthly income above the prescribed limit of £75 (this figure increased from £50 on 29 June 2021);
    •have property (assets) valued at above the prescribed limit of £2,000 (this figure increased from £1,000 on 29 June 2021) (but see below where the client owns a single domestic motor vehicle).
Transactions at an undervalue and preferences
The official receiver can refuse to make a DRO if the client has entered into a transaction at an undervalue (see here) or given a preference to anyone (see here) at any time during the two years before the application is made or during the period between the application date and the determination date. Note: these are different time limits to those for bankruptcy. Note also: the client need not have intended to give a preference (although the official receiver considers this when exercising discretion).
Payments made directly to the client’s creditors by third parties using their own funds are not considered to be preferences for the purpose of a DRO order, neither are payments made by clients out of their surplus income to priority creditors. However, lump sum payments to priority creditors do need to be reported as preferences (including the source of the funds and why the payment was made) so that the DRO Team can make the decision, even if this is unlikely to be a decline.2See L Charlton, ‘Q&A with the Shelter Specialist Debt Advice Service’, Quarterly Account 48, IMA, p24 Payments in respect of a fixed-penalty notice where the consequences of non-payment are potentially a prosecution and fine in the magistrates’ court are not considered to be preferences. Contractual payments made to creditors and payment of instalments under a county court (or High Court) judgment are not considered to be preferences. Repayment of loans to friends and family are likely to be considered preferential and could lead to the DRO being declined.
Calculating the value of property and amount of surplus income
When calculating the value of property and the amount of surplus income, the following property is disregarded:
    •tools, books and other items of equipment (but not motor vehicles) that are necessary for the client’s personal use in her/his employment, business or vocation;
    •clothing, bedding, furniture, household equipment and the necessary provisions for satisfying the client’s basic domestic needs and those of her/his family;
    •a single domestic motor vehicle belonging to the client and worth less than the prescribed amount (currently £2,000 which was increased from £1,000 on 29 June 2021); or
    •a single domestic motor vehicle belonging to the client which has been specially adapted for the client’s use because of her/his disability.
Property is valued at its gross, rather than net, realisable (and not replacement) value and so clients who are homeowners do not qualify even if their property has negative equity.
When calculating the client’s surplus (or available) income, the official receiver must take into account any contribution made by any member of the client’s family to the amount necessary for the reasonable domestic needs of the client and her/his family. In practice, the client’s financial statement must be completed using standard financial statement principles (see here). A DRO is an individual remedy and so, if the client is a member of a couple, the financial statement must show the client’s available income and not that of the couple.3For guidance on drawing up financial statements if the client is a member of a couple, see P Madge, ‘A Single Statement’, Adviser 147 updated by L Charlton and republished in Adviser online, 8 January 2020.
If the client has an attachment of earnings order, a direct earnings attachment or is having deductions from benefits made which will cease once the DRO is made (because creditors must cease exercising any remedy in respect of qualifying debts during the moratorium period), prepare the client’s financial statement on the basis of her/his earnings before the deductions are made. Include any essential expenditure that is needed for the client’s reasonable domestic needs, even if it is now unaffordable. Provided the client’s surplus income is still £75 a month or less, the application for a DRO can proceed. However, you should explain to the official receiver on the application form or in a separate email that the client is subject to an attachment or earnings order or deductions from benefits and that her/his budget has been prepared on the basis of including essential expenditure which is currently unaffordable, but will be affordable once the order or deductions stop.
 
1     Clients who are not British citizens and who are considering applying for a DRO should be advised to consult an immigration solicitor first, as it may affect their immigration status and any application for British citizenship. »
2     See L Charlton, ‘Q&A with the Shelter Specialist Debt Advice Service’, Quarterly Account 48, IMA, p24 »
3     For guidance on drawing up financial statements if the client is a member of a couple, see P Madge, ‘A Single Statement’, Adviser 147 updated by L Charlton and republished in Adviser online, 8 January 2020. »
Issues with particular types of expenditure
No payments can be included in the client’s essential expenditure for any debt included in the DRO.
 
Rent arrears and payments under controlled agreements
Rent arrears are not an allowable expense, whether the rent arrears are payable under a suspended possession order or under an agreement made with the landlord. However, rent arrears can be paid after a DRO is made, either from the client’s surplus income or by a third party.
The position with payments under controlled goods agreements has recently changed. Any payments made to the bailiffs to prevent them removing the goods must usually be made from the client’s surplus income or by a third party but are an allowable expense if the goods subject to the controlled goods agreement are for ‘the reasonable domestic needs’ of the client and her/his family.
 
Hire purchase payments
Ongoing hire purchase payments are only an allowable expense if:
    •the client chooses to omit the outstanding balance from the DRO (see here); and
    •the goods would be disregarded goods if they belonged to the client - ie, if they are a single domestic motor vehicle worth less than £2,000 or one that has been specially adapted because the client has a disability or where the goods are necessary to meet the client’s basic domestic needs; or
    •where the goods are not disregarded but the expenditure is considered necessary to meet the client’s basic domestic needs (in the case of a vehicle worth more than £2,000, an email should be sent to the DRO Team at the time the DRO application is submitted detailing why the client should be allowed to continue making the repayments and the factors the DRO Team will consider include when the agreement was taken out, whether public transport is available and whether the repayments compare favourably with the cost of public transport).1See R Curry and S Wilcox, ‘Debt Relief Orders - approaching the grey areas’, Quarterly Account 52. In the article, the DRO team is quoted as saying such expenditure would be allowed in ‘exceptional circumstances’ but this may be challengeable under the Insolvency Rules.
 
1     See R Curry and S Wilcox, ‘Debt Relief Orders - approaching the grey areas’, Quarterly Account 52. In the article, the DRO team is quoted as saying such expenditure would be allowed in ‘exceptional circumstances’ but this may be challengeable under the Insolvency Rules. »
Issues with particular types of property1See R Curry and S Wilcox, ‘Debt Relief Orders - approaching the grey areas’, Quarterly Account 52. In the article, the DRO team is quoted as saying such expenditure would be allowed in ‘exceptional circumstances’ but this may be challengeable under the Insolvency Rules.
 
1     See R Curry and S Wilcox, ‘Debt Relief Orders - approaching the grey areas’, Quarterly Account 52. In the article, the DRO team is quoted as saying such expenditure would be allowed in ‘exceptional circumstances’ but this may be challengeable under the Insolvency Rules. »
Issues with particular types of property
Cash
Cash in hand or in a bank account can be disregarded if it is intended to be used to pay for the essential expenditure listed in the income/expenditure section of the application. Regardless of its original source, cash is property unless it represents arrears of disability benefits (ie, attendance allowance, disability living allowance, personal independence payment, disability premiums paid with legacy benefits, the severe disability premium paid with pension credit and the disabled child element of UC) or equivalent benefits paid to armed forces personnel.
Money owed
If the client is owed money, it is regarded as property unless s/he has unsuccessfully attempted to recover it and these attempts are documented. Arrears of child support and compensation owed to the client through the magistrates’ court are not property for this purpose.
Pensions
Any undrawn ‘approved’ pension entitlement should not be taken into account when assessing the value of the client’s property. However, if the value of the pension fund (net of any income tax payable and charges on withdrawal) exceeds the client’s total debts and the client is aged 55 or over (or, according to the DRO Team will be aged 55 or over before the end of the moratorium period) so that she/he would be entitled to withdraw all or part of her/his pension as a lump sum, the official receiver says that consideration should be given to whether the client is ’unable to pay’ her/his debts and that advisers should contact the official receiver to discuss whether a DRO is likely to be made in these circumstances.
Right to claim compensation
The client’s right to claim compensation from another person or organisation is potentially property, but not if the claim is purely personal to the client – eg, for personal injuries. However, if the claim includes a claim for a ’pecuniary loss’ (eg, lost wages), only that part of the claim is regarded as property. Compensation from the Windrush scheme is treated in a similar way to compensation for personal injury claims.1See ‘Windrush compensation and insolvency’, L Charlton, Adviser online,19 September 2019 Claims for compensation to the Criminal Injuries Compensation Authority are not regarded as property, even if pecuniary losses are included.
If the client is pursuing a claim, her/his solicitor should be contacted to confirm whether or not the other party has accepted liability and how much compensation the client is likely to receive, and then specialist advice should be sought about whether the client’s right counts as property for DRO purposes.
Note: if a client becomes entitled to receive compensation during the 12-month moratorium period (see here) or even afterwards, this could lead to any DRO being revoked. This also applies to rights to action that are not regarded as property at the pre-order stage. It might be in a client’s best interests to resolve any potential or pending compensation claims before deciding whether or not a DRO is the most appropriate option.
This advice also applies to clients who have outstanding claims for refunds of premiums for mis-sold payment protection insurance in connection with any credit agreements (see here). The official receiver says:
    •refunds are not property until the creditor or insurance company accepts the claim and the amount of any refund has been agreed;
    •creditors can exercise any contractual right to set off the refund against any debt owed by the client. If this is done before the DRO application is made, it is not regarded as a preference. If it is done during the 12-month moratorium, it is not regarded as a remedy in respect of the debt;
    •any refund paid to the client during the moratorium period could result in the DRO being revoked.
Any funds received before the DRO application can be paid pro rata to qualifying creditors without involving any issue of preference.
 
1     See ‘Windrush compensation and insolvency’, L Charlton, Adviser online,19 September 2019 »
Making the application
The application is made to the official receiver online through an approved intermediary. It must be made on a prescribed form and contain prescribed information. A fee is payable (currently £90) and there is no remission. The fee can be paid by instalments through Payzone or a post office. There is no time limit for payment of the fee, but clients who are close to the maximum debt ceiling should be aware that accruing interest and charges may take them over the limit if they take too long to pay the fee. However, should the application not be opened for six months, an email will be sent to the intermediary informing her/him that it will be deleted if not updated within 28 days. Should this happen, any fee paid will be refunded to the client.
In order to reduce the costs and speed up the process, the official receiver makes certain assumptions when determining an application, unless s/he has reason to believe otherwise, that:
    •the client is unable to pay her/his debts; and
    •the specified debts are qualifying debts; and
    •the client satisfies the conditions for a DRO (see here).
On receipt of an application and confirmation that the fee has been paid, the official receiver may:
    •defer consideration of the application to enable her/him to make enquiries; or
    •refuse the application on the grounds that:
      ◦the client does not meet the criteria; or
      ◦the client has given false information in connection with the application; or
      ◦the application is not on the prescribed form or does not contain the prescribed information; or
      ◦the client has not answered questions to the official receiver’s satisfaction; or
    •make a DRO containing details of the client’s qualifying debts.
The official receiver also carries out verification checks. The Individual Insolvency Register is checked to see if the client is currently an undischarged bankrupt, subject to an IVA, a bankruptcy restrictions order or undertaking, or a debt relief restrictions order or undertaking. The official receiver also carries out a credit reference check through Experian to check the client’s identity, residence and total debts.
Common reasons for DROs being declined are because:
    •the client has had a previous DRO in the last six years.
    •the client’s total debts are found to exceed the debt limit;
    •the client has made a preference in the previous two years.
It is good practice for advisers to carry out these checks themselves and to address any issues disclosed before applying for a DRO – eg, if the credit report incorrectly shows that the client’s total debts are over £30,000. If it is not possible to get the Experian report amended before submitting the DRO application, the evidence demonstrating the inaccuracy of the report should be submitted to the official receiver by email or fax before the application itself, with a request that the evidence be taken into account when considering eligibility for the DRO. If this is not done, the order is declined. The official receiver tends not to reconsider such decisions, but the client can resubmit the application provided either the report has been amended or the evidence is submitted. This costs the client a further £90 fee.
Note: A recent unreported County Court decision has held that a DRO which has been revoked has been cancelled, nullified or rescinded and, therefore, never existed. The DRO Team has accepted this decision which means that, where a client has had a DRO within the previous 6 years and that DRO was revoked, this will not prevent the client from applying again (provided, of course, they meet all the other qualifying conditions).
Note: see below and here if the client or a member of her/his family is at risk of violence and does not want details of her/his address to be entered on the Individual Insolvency Register.
After the application is made
Once the DRO application is made, the client must co-operate with the official receiver. This includes providing any information that the official receiver may require.
If the official receiver declines to make the order, s/he must give her/his reasons to the client. The fee is not refunded. The client can apply to the court and ask it to overrule this decision. In practice, the official receiver is prepared to reconsider decisions and should be asked to do so before any court application is made.
If an order is made, details are registered in the Individual Insolvency Register (see here) (and on the client’s credit reference file). If the client has reasonable grounds for believing that s/he or any member of her/his family who normally resides with her/him would be at risk of violence if her/his current address or whereabouts was disclosed, this can be flagged up on the application form. Where applicable, the client can make an application to the court for an order confirming that her/his details should not include her/his address. The application (known as a ‘person at risk of violence’ (PARV) order) is made to the court for the insolvency district in which the client resides. There is no prescribed form, but the Insolvency Service has produced a number of template forms which are available at gov.uk/government/collections/insolvency-service-forms-england-and-wales (‘Debtor application for an order for non-disclosure of current address’). The court fee is £280. Remission can be applied for, although advisers report that some courts are not charging the fee even where the client does not strictly qualify for remission because of the nature of the application.
Where a client needs a PARV order, the DRO Team says this should be obtained prior to the submission of the DRO application and a copy emailed to the DRO Team when the application is submitted. The application can be made once the DRO ID number is generated. Where an application indicates a PARV order is required to withhold the client’s address, but this has not yet been obtained, the DRO Team will not process the application until a PARV order is obtained and a copy emailed to them. Depending on the length of any delay, an intermediary would need to check the client was still eligible and update the application as necessary.
Any creditor listed in the DRO may object in writing to the DRO being made or to the inclusion of details of their debt(s) on the prescribed grounds (ie, that the client is not eligible for the DRO; it is not a valid ground that the creditor does not want to be included) within the prescribed period – 28 days after the creditor has been notified of the order.
The official receiver must consider every objection and may conduct an investigation if s/he considers it appropriate. If the official receiver decides to revoke the DRO, s/he must give the client details of the objection and the grounds and give the client 21 days in which to respond, stating why the order should not be revoked. If the official receiver decides to revoke the DRO, s/he can do so with immediate effect or at a future date, no more than three months later in order to give the client time to make payment arrangements with her/his creditors. The client can apply to the court to overrule this decision.
Reporting changes in circumstances
**Alert: The DRO Team has confirmed that, if the client gets a backdated payment of the LCWRA element of UC during the moratorium because her/his work assessment was delayed by the coronavirus outbreak, this must be reported to the DRO Team but will not lead to revocation of the DRO (backdated payments of the LCWRA are not usually disregarded, see below).**
Once a DRO is made, the client must inform the official receiver as soon as reasonably practicable of any increase in her/his income during the moratorium period, or of any property s/he acquires. The purpose of this is to ensure that s/he remains eligible for the order. If not, the DRO could be revoked. When reporting an increase in income, an up-to-date financial statement should also be provided, amending any items of expenditure that have changed since the date of the application. If the client’s surplus income is found to exceed £75 a month, the client’s DRO could be revoked.
The annual uprating of benefits is not a change that must be reported. Receipt of winter fuel payments or a maternity grant must be reported and do not lead to revocation of the DRO. On-going payments of attendance allowance, disability living allowance, personal independence payment and ‘equivalent benefits’, including disability premiums paid with legacy benefits and the severe disability premium paid with pension credit, can be off-set against ‘adult care costs’ and back-dated arrears of these benefits and arrears of disability premiums are disregarded, but their receipt must be reported. The DRO Team has also confirmed that if a client is receiving the disabled element of UC for a child in her/his care, any lump sum or ongoing payments can be disregarded/off-set. Arrears and on-going payments of employment and support allowance itself are not disregarded and neither are the limited capability for work/limited capability for work and work-related activty elements of universal credit.
Prior to 29 June 2021, the DRO Team’s so-called ‘Lump Sum Protocol’ applied. The effect of this was that, unless accompanied by an increase in income which took the client’s surplus income over what was then the £50 a month surplus income parameter, provided the client reported the acquisition of any property (including lump sums of income) to the DRO Team within 14 days and the value of the property did not exceed 50 per cent of the client’s qualifying debts, the DRO Team treated any property acquired by the client during the moratorium period as follows.
    •If the value of the property (including lump sums) was £1,000 or less, the DRO Team did not revoke the DRO.
    •If the value of the property was between £1,000 and £1,990 (including lump sums), the DRO Team considered all cases on their merits.
    •If the value of the property exceeded £1,990 (including lump sums), the DRO was usually revoked unless there were exceptional circumstances.
With effect from 29 June 2021, provided increases in income and/or acquisitions of property during the moratorium are reported to the DRO Team as above, if the client’s surplus income does not exceed £75 a month or the value of the property acquired is not more than £2,000, the DRO will not be revoked. If the value of any lump sum received is more than £2,000, the DRO Team will no longer use the ‘Lump Sum Protocol’ but will instead take into account all the client’s circumstances and make their decision as to whether or not to revoke the DRO based on the merits of the case. Note: This applies to DROs made before 29 June as well as to DROs made on or after that date. However, if the DRO was made before 29 June 2021 and an additional debt is discovered during the moratorium which takes the client’s debts over the £20,000 limit that applied when the DRO was made, the new debt limit will not apply as the client was not eligible to apply for a DRO at the time when the DRO was made.
The only situation in which a DRO must be revoked is if the client dies. In all other cases, the decision to revoke is discretionary and the official receiver should take the individual circumstances of the case into account before making a decision.
The effect of a debt relief order
Once the DRO is entered on the Individual Insolvency Register, a moratorium takes effect in respect of the specified debts, and the creditors specified in the order have no remedy in respect of their debts. This means they cannot force the client to pay the debts included in the DRO. They are also prohibited from issuing proceedings to enforce their debts or from presenting a bankruptcy petition without permission of the court. Any pending court proceedings may be stayed. The moratorium period is one year. During the moratorium, the client is subject to the same restrictions as in bankruptcy – eg, on obtaining credit (see here).
The making of a DRO revokes an enduring power of attorney and also a lasting power of attorney so far it relates to the donor’s property or affairs.
Unless the moratorium period is terminated early, at the end of the moratorium the client is discharged from her/his qualifying debts listed in the order (but not from any debts incurred through fraud).
Payments to creditors
With a few exceptions, clients cannot make payments to any creditor included in the DRO but, in appropriate cases, a third party can make the payments from her/his own income on the client’s behalf (see here). The rights of secured creditors (including if a bailiff has a controlled goods agreement) are unaffected and the client may continue to make payments from her/his surplus income in order to protect the goods. Alternatively, a family member or friend could continue to make the payments (see here).
The client can pay any rent arrears included in the DRO out of her/his surplus income if s/he is at risk of repossession or if, for example, her/his landlord will not agree to a transfer request unless the arrears are paid. Alternatively, a family member or friend could continue to make the payments.
Although the client could apply to vary an existing suspended possession order to provide for payment of her/his current rent only or ask the court to suspend any post-DRO possession order on payment of current rent, there is no guarantee that the court will make such an order and specialist housing advice should be obtained before an application is made.
If a hire purchase debt is included in a DRO, a third party can either make the payments from her/his own income on the client’s behalf in order to protect the goods from repossession by the creditor or arrange to transfer the agreement into her/his own name with the consent of the creditor and the client.
Overpayments of benefits or tax credits can only be included in a DRO if the recovery decision has been made before the date of the DRO application. Such overpayments cannot be recovered by deductions from ongoing benefits or tax credits either during or after the moratorium period (unless the debt was incurred through fraud when recovery by deductions can be resorted to after the end of the moratorium period). The DWP says that where the overpayment period is either entirely before the date of the DRO or spans the date of the order, its policy is to to suspend recovery until the end of the moratorium period when the debt will be written off it if was included in the DRO, but normal recovery action will recommence in the case of fraudulent overpayments. If the overpayment decision was not made until after the DRO was approved (so that it could not be included), it is DWP policy to suspend recovery of that overpayment until the end of the moratorium period. The DWP applies the same policy to social fund loans even though they are excluded debts. The DWP should be challenged if it fails to comply with this policy and continues with deductions regardless of the DRO, although if the overpayment has been included in the order, the DWP could be challenged for exercising a remedy in respect of the debt.
The role of intermediaries
In order to obtain a DRO, a client must apply through an approved intermediary. Intermediaries are authorised by competent authorities (such as Citizens Advice and the Institute of Money Advisers) and cannot charge fees in connection with an application. The responsibilities of intermediaries include:
    •assisting clients to make applications;
    •checking that applications have been properly completed;
    •sending applications to the official receiver.
Intermediaries must:
    •inform the client that the official receiver carries out verification checks (see here);
    •assist the client to complete the online application if, after having the various debt options explained to her/him, s/he wishes to apply for a DRO. An intermediary must submit an application to the official receiver if instructed to do so by the client, even if the client has been advised that there are other available options, and/or that the application will be rejected and s/he will consequently lose the £90 application fee;
    •draw the client’s attention to all the qualifying conditions, the effects of a DRO (including the duties and restrictions on the client as well as the moratorium period and discharge from the scheduled debts); and
    •explain the possible consequences of providing false information or omitting information from a DRO application – eg, the possibility that the order could be revoked and the consequences of that in relation to her/his creditors, plus possible criminal and/or civil penalties such as a debt relief restrictions order (see here).
An intermediary may also assist the client to:
    •identify what information is required to complete an application;
    •establish whether or not her/his total debts, income and assets exceed the prescribed amounts; and
    •ensure the application is fully completed.
Intermediaries are advised to write ’confirmation of advice’ letters covering these areas and, if the advice is that the client is not eligible for a DRO, to get the client to sign the letter if s/he insists on going ahead. The use of a standard post-DRO letter reminding clients of their responsibilities and what happens next is also recommended.
The Insolvency Service expects intermediaries to satisfy themselves that applications are accurate and, where possible, to verify the information supplied by clients. If the client insists on submitting the application against the intermediary’s advice, because it is clear s/he does not qualify (eg, the client’s debts exceed the £30,000 limit), then the application can indicate this.
To assist intermediaries, the Insolvency Service has provided Intermediary Guidance Notes on completing the application and Debt Relief Orders: Guidance for Debt Advisers (formerly the DRO A-Z) containing technical information, which are updated from time to time, together with a regular newsletter (availble from your competent authority). The Guidance for Debt Advisers and the Intermediary Guidance Notes are available at: gov.uk/guidance/debt-advisor-tools-and-information.1The current version of the Intermediary Guidance Notes is v16, although described as v15 in the link. Version 17 is expected to be available at some point but there is currently no indication of when this might be. It is essential that intermediaries familiarise themselves with, and use, these documents when advising clients and preparing applications. At the time of writing, version 17 of the Intermediary Guidance Notes was expected imminently.
A DRO toolkit is also available, which can be accessed either in AdviserNet, the IMA’s website (i-m-a.org.uk) or at Wiseradviser (wiseradviser.org).
 
1     The current version of the Intermediary Guidance Notes is v16, although described as v15 in the link. Version 17 is expected to be available at some point but there is currently no indication of when this might be. »
The role of the official receiver
The official receiver can amend the DRO during the moratorium period to correct errors or omissions. However, s/he cannot add any debt(s) not specified in the application. This means that, unlike in bankruptcy (where provable debts are covered by the order even if they are not included in the application), if any debt which would have been a qualifying debt for DRO purposes is omitted from the application, it cannot be added at a later date. Ultimately, it is the client’s responsibility to inform the intermediary of all her/his debts. It is advisable for the client to obtain a copy of her/his credit reference reports (and essential to obtain a report from Experian) before an application is completed to ensure, as far as possible, that all qualifying debts are included.
In addition to being under a duty to report to the official receiver certain changes of circumstances, including if s/he moves to a new address, and to co-operate with requests for information from the official receiver, if the client becomes aware after the order is made of any error or omission in the information supplied in support of the application, s/he must inform the official receiver as soon as possible.
The DRO notification letter sent to creditors also invites them to inform the official receiver of any conduct or behaviour by the client that may be relevant.
The official receiver may revoke the order (but is not required to do so) if:
    •information provided by the client is incomplete, inaccurate or misleading;
    •the client has failed to co-operate with the official receiver or provide the required information;
    •a bankruptcy order has been made against the client or s/he has proposed an IVA to her/his creditors;
    •the official receiver should not have been satisfied that the client met the conditions for making it (see here);
    •at any time after the client applies for an order, s/he no longer meets the conditions on the monthly surplus income and/or assets;
    •the client dies (in which case, the order must be revoked).
Common reasons for revocation are:
    •the value of the client’s property (assets) is found to be in excess of £1,000;
    •the total of the client’s debts is found to be in excess of £20,000;
    •the client has died.
The official receiver can revoke the DRO either with immediate effect or at a specified date no more than three months ahead. S/he must consider whether the client should be given the opportunity to make arrangements with her/his creditors for payment of her/his debts.
A creditor or client who is dissatisfied with the official receiver’s decision can apply to the court to overrule this decision. In practice, the official receiver reconsiders any decision if asked to do so.
Clients who have had a DRO revoked, no longer need to wait 6 years from when that DRO was made to apply for another DRO (see here). If that is being considered, you should explore the reason(s) the previous DRO was revoked, when this was and how how the issues that led to the revocation have been resolved. This is because the DRO Team may want to satisfy itself that this was was done appropriately -eg, did not involve a preference or a transaction at an undervalue being made.
Offences and restrictions
As with bankruptcy, it is a criminal offence for the client to:
    •make false representations or omissions in connection with a DRO application;
    •fail intentionally to co-operate with the official receiver or knowingly or recklessly make false representations or omissions in relation to information supplied in connection with a DRO application or after a DRO is made;
    •conceal or falsify documents;
    •dispose of property fraudulently;
    •deal fraudulently with property obtained on credit.
During the moratorium (or while a debt relief restrictions order or undertaking is in force), the client cannot:
    •obtain credit of £500 or more without revealing her/his status to the lender;
    •trade in a name that is different from that in which the DRO was made without revealing the name in which the order was made to everyone with whom s/he has business dealings;
    •be a director of a limited company without the permission of the court.
A breach of any of these requirements is a criminal offence.
If, during the course of any enquiries, the official receiver believes that the client has been dishonest or irresponsible (either before or during the period of the DRO), s/he can apply for a debt relief restrictions order, or obtain an undertaking from the client, on the same grounds as a restrictions order or undertaking can be applied for in bankruptcy and for the same two- to 15-year period (see here). The effect of a debt relief restrictions order or undertaking is to extend the restrictions that applied during the moratorium. Unless the court orders otherwise, the revocation of the DRO does not affect any debt relief restrictions order or undertaking.