What happens if my circumstances change while in a Debt Relief Order?
If your financial situation improves while you are in a debt relief order meaning that your disposable income rises above £50 a month, the arrangement will be cancelled. You will go back to the position you were in before your DRO started. None of your debt will be written off and your will remain liable to repay it.
This is one of the major criticisms of the DRO rules as it provides a disincentive for someone in a DRO to try and improve their income so that they can provide a better return to their creditors.
Can I start a Debt Relief Order if I have a pension?
On the 6th April 2011 the rules relating to pensions and debt relief orders changed. From the 6th April 2011, if you have a personal pension which is approved as defined under Section 11 (2) of the Welfare Reform and Pensions Act 1999 valued more than £300, you can still start a debt relief order.
This means that the majority of occupational and personal pension schemes will now be allowed if someone undertakes a DRO.
Can all my Debts be included in a Debt Relief Order?
The majority of your unsecured debts can be included in a Debt Relief Order. However, some debts are excluded:
• Magistrates and court fines.
• Student loans
• Secured debts (for example debt secured against property)
Will a Debt Relief Order effect my credit rating?
Yes. Your credit rating will be affected for 6 years from the time your debt relief order is granted (in the same way as if you had declared bankruptcy). The fact that you are in a Debt Relief Order will be included in the Insolvency Register and reported to various credit reporting agencies.
Does a Debt Relief Order come with any restrictions?
Yes - similar to the restrictions you would face if you were declared bankrupt. For example, you would not be able to obtain credit of £500 or more without declaring that you`re subject to a Debt Relief Order.
My bank is a creditor; should I open a new bank account?
If you enter into a debt relief order, you can still have a bank account and manage it yourself. If you owe money to your bank, perhaps in the form of a credit card, personal loan or overdraft, you will almost certainly need to open a new account with a different bank.
The reason for this is that to resolve a debt problem, you need to be able to ensure that you are in full control of your money and keep your income separate from all your creditors. If you need to open a new account, you should ask for a basic account only with no overdraft facility. You should be able to do this even if you have a poor credit rating. There are many banks which offer this facility. Please follow this link for more information about opening bank accounts.