Guidance

DRO guidance for Approved Intermediaries

Updated 28 June 2024

Applies to England and Wales

Many debt relief options, such as bankruptcy, are less accessible because of the application costs.

In these circumstances, Debt Relief Orders (DRO) can be an option.

Applicants do not need to pay for a DRO – there’s no application fee.

In response to the cost of living crisis, the government is offering help for households.

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1. Eligibility criteria

To be eligible for a DRO, applicants must meet the following criteria:

• not be able to pay their debts
• owe less than £50,000
• have less than £2,000 worth of assets
• not own a vehicle worth £4,000 or more
• have lived or worked in England or Wales within the last 3 years
• not have applied for a DRO within the last 6 years

You should warn your client that we will reject a DRO application if they do not meet the criteria.

A DRO is not the right solution if your client has assets worth more than £2,000, more than £75 per month in income after household expenses, or their financial situation is likely to improve soon. You should look at other debt relief options with your client.

The applicant must not be involved in any other formal insolvency. This includes:

• undischarged bankruptcy orders
• current Individual Voluntary Arrangements
• current Bankruptcy Restrictions Orders or undertakings
• current Debt Relief Restrictions Orders or undertakings
• interim orders

We will reject any DRO applications if the applicant is waiting for a decision on:

• a bankruptcy order
• a creditor’s bankruptcy petition against, and they do not have the creditor’s permission to apply for a DRO

We might also reject a DRO application if the applicant has:

• given away any property or sold it for less than its true value in the last 2 years (an undervalue transaction)
• made payments to creditors within the last 2 years, that put them in a better position than others (a preference payment)

2. Cost

Applicants do not need to pay for a DRO – there’s no application fee.

3. Applicant responsibilities whilst in a DRO

After an applicant has applied for a DRO they must:

• tell us if their circumstances change that will affect their application. This covers any time between you creating their application, and when we make a decision
• give us any extra information we ask for
• tell us if they receive any property or an increase in their income while in the DRO
• not make payments to creditors listed in the DRO (there are some exceptions. More information is available within our guidance for debt advisors)
• tell us of any changes to their address during the DRO period

We might not need to contact the applicant, but they must give us any extra information we may ask for.

3.1 Consequences of getting it wrong

We may reject an application if we find the applicant has left out information before we approve a DRO.

We may revoke a DRO if we later find out the applicant left out information. This means creditors will be able to start action against the applicant again.

If we think the applicant left out the information deliberately, we might also apply for criminal or civil sanctions against the applicant, for example a Debt Relief Restrictions Order (DRRO).

4. Effects of a DRO

A DRO normally lasts 12 months (DRO period).

If approved, payments towards the debts (and interest) listed in the DRO no longer have to be made during that time.

After the DRO period ends, these debts will not have to be paid anymore.

A creditor who is owed a listed debt cannot:

• start of continue any enforcement action against the debtor
• start insolvency or other proceedings to recover the debt, unless the court lets them
• take the applicants assets to pay back the debt

If the creditor has lost money trying an enforce this kind of action, you should list this as a qualifying debt.

The applicant is still liable for any debts they incurred through committing fraud. The creditor can start any enforcement action on these debts again.

When a DRO ends, the applicant does not need to update us about further changes to their circumstances.

4.1 Controlled goods agreement (CGA)

Creditors with a controlled goods agreement (CGA) in place are secured creditors and are not affected by a DRO. Any goods can be taken by bailiffs if the applicant does not make the agreed payments.

4.2 Rent arrears

Rent arrears are qualifying debts and you must include them in the DRO. But creditors can still start or continue possession action.

4.3 Payments for rent arrears or under a CGA

If the applicant is in a CGA or has rent arrears, they can make these payments to avoid losing their home or possessions. We will not stop an applicant making these payments.

You should not include them when you’re assessing the applicant’s surplus income.

4.4 Change of circumstances

We may revoke a DRO if an applicant’s circumstances change and they are able to make payments to their creditors.

If the changes in circumstance are near the end of the DRO period, we can extend the DRO for up to 3 months, so the applicant has time to come to an arrangement with their creditors before we revoke the DRO.

During this extension, an applicant will be under the same restrictions, and same protections they were under during the first 12 months of the DRO.

4.5 Payments to creditors

We will contact all creditors with qualifying debts when a DRO is made. We will tell them they will not be able to recover the listed debts they are owed. The applicant must not make any more payments to those creditors.

If any creditor contacts the applicant during the DRO period asking for payment, the applicant should tell them they are in a DRO. Creditors cannot enforce the debts.

4.6 Contact from creditors

You should advise your clients that there are some circumstances where creditors can contact them during the DRO period.

Some creditors legally need to send notifications, even to individuals in a DRO. This includes statements confirming how much money is still outstanding. While they can send these notifications, they cannot request payment.

Individuals in a DRO do not need not take any action when creditors with included debts contact them. They should not send them any money unless they are for controlled goods agreements and rent arrears sections.

4.7 Debts not included in a DRO

A DRO will not cover any debts left out of the application. The applicant will have to pay these debts and creditors can take enforcement action.

The applicant should tell us as soon as possible if they have left a debt out of the application. We may cancel the DRO if a missed debt takes the applicant over the £50,000 limit.

An applicant might face criminal or civil action if they deliberately leave out a debt.

4.8 Incorrect debt balance

Applicants must give accurate information in their application. We can amend an incorrect debt balance. We will cancel the DRO if the amended total is over £50,000.

We can amend the debt amount but we cannot add a debt not included in the original application.

4.9 Joint debts

Joint debts include joint bank accounts. A DRO does not protect or write off the liability for any other joint debt holder.

The protections will only apply to the individual in the DRO and we can only write off the debt for the individual in the DRO.

You must include guarantor loans in the application. The DRO does not write off the debt for the guarantor and they are liable for the applicant’s repayments.

4.10 Applicant’s estate

DROs are not the same as bankruptcy orders. We have no claim over the applicant’s property and cannot sell assets or pay dividends to creditors.

4.11 Supporting evidence

The applicant should be able to provide documents confirming the information provided on their application. This includes evidence on their assets, liabilities, income and expenditure. To make sure the application is accurate, you should check any documentation carefully before you submit the application.

You must also tell the applicant they need to keep all finance paperwork for a minimum of 15 months. This includes accounting records, bank statements or invoices. There might be some circumstances where the applicant will have to keep this sort of paperwork even longer.

5. DRO restrictions

Individuals in a DRO must follow certain restrictions. The main restrictions are:

1. The applicant must not obtain credit of £500 or more, either alone or jointly with another person, without telling the lender they are subject to a DRO. This can include an applicant ordering goods without requesting credit but then not paying for the goods when they are delivered.

2. If you carry on a business you must use the same name that the DRO was made in. Or you must tell all those you are dealing with, that you are in a DRO.

3. The applicant cannot be involved (directly or indirectly) with the promotion, management or formation of a limited company. They cannot act as a company director, without a court’s permission.

4. The applicant cannot hold certain public offices, or hold offices as a trustee of a charity or a pension fund.

5. The applicant will not be able to apply for a DRO again for 6 years from the date of their order. You can check for previous DROs on the Individual Insolvency Register.

5.1 Debt Relief Restrictions Orders or Undertakings

If we find that the applicant has not been honest either before or during the DRO period, or that the applicant has behaved irresponsibly, we might apply to the court for a Debt Relief Restrictions Order (DRRO) or ask them to agree a Debt Relief Restriction Undertaking (DRRU).

The applicant would be under DRO restrictions for a further 2 to 15 years after the date of the DRO.

If the applicant has a DRRO or DRRU, their details will stay on the Individual Insolvency Register until 3 months after the order or undertaking ends.

5.2 Effect on future credit

You should tell applicants that the DRO will be shown on the Individual Insolvency Register. Their details will stay on the register until 3 months after the DRO ends.

Credit reference agencies will also usually keep details of the insolvency for 6 years from the date the DRO is approved. This period might vary depending on different agencies. This might make it more difficult or more expensive for the applicant to get credit in the future.

6. The Official Receiver

Once the application form has been submitted, we will process the applicant’s application and will issue a DRO if approved.

You should tell the applicant that we can decline or delay a DRO application while waiting for more information from them. This means that submission of an application does not automatically grant them a DRO.

6.1 Investigation

We can investigate (or a creditor can object to a debt, which might trigger an investigation) and can issue sanctions under DRO legislation. This includes cancelling a DRO, or enforcing criminal or civil action on an applicant if:

• we find the applicant gave us false information
• we find the applicant has not disclosed assets, liabilities or income in their DRO application
• we find the applicant did not meet the entry criteria
• the applicant did not cooperate with our enquiries

If we need more information to make a decision, we might contact the applicant. The applicant must provide us with requested information.

6.2 Verification checks

Once you submit a DRO application, we’ll carry out verification checks with an approved credit reference agency. You must tell the applicant we will carry out these checks. The applicant agrees to these checks when you submit a DRO application.

6.3 DRO decision

If an application is approved, we will send a notice of the order to:

• the applicant
• all of the creditors listed in the application
• the intermediary

We will inform you if we decline an application. We will provide you with reasons for our decision.

7. Approved intermediaries

An approved intermediary is a debt advisor approved to act as an intermediary (who can apply for a DRO) by a competent authority.

Only an approved intermediary can submit a DRO application.

An applicant may want to apply for a DRO, but if their debt adviser is not an approved intermediary. The debt advisor must refer the applicant to an approved intermediary before they can apply for a DRO.

7.1 Competent authorities

A competent authority can authorise an individual to act as an intermediary.

The competent authority makes sure you have appropriate training and experience, as well as complaints and equal opportunities procedures in place. An organisation can apply to the Secretary of State to become a competent authority.

See our list of organisations who can help apply for a DRO

7.2 Approved intermediaries

Approved intermediaries act as an agent between an individual looking for a DRO and the Insolvency Service. You should give the applicant all their debt options. If they choose to apply for a DRO, you should give the applicant help and complete the DRO application form.

You should complete basic checks on the information the applicant gives you. This might include paperwork and evidence of income and liabilities.

Intermediaries must make sure applicants are aware of:

• all the qualifying conditions
• the effects of the DRO
• what they have to do under a DRO
• any restrictions on them
• the DRO period
• what happens to qualifying debts at the end of the DRO period
• consequences of sending false information or leaving out information from a DRO application

We may cancel a DRO if the applicant has provided false information or left out important information. Creditors will be able to enforce their debts and we may take criminal or civil action.

Applicants can decide if they want to submit a DRO application. But you should have already decided whether a DRO is suitable. You are responsible for checking the applicant’s circumstances before you submit the application form.