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Debt relief orders and possession

This content applies to England

If a tenant is subject to a debt relief order (DRO), the possession proceedings can continue but there are restrictions on the rent that the landlord can recover.

Introduction to DROs

DROs are a form of debt relief for certain individuals[1] with low income and very few assets who are unable to pay their debts.[2]

A DRO lasts generally for 12 months, unless revoked or extended.[3] At the end of this period, if the DRO has not be revoked,[4] the debtor will be discharged from the qualifying debts specified in the DRO.[5]

A qualifying debt must be for a quantifiable amount and be due for payment either immediately or at some certain time in the future, and must not be a 'secured' debt or an 'excluded debt'[6] (see below). Benefit overpayments can be specified in a DRO as qualifying debts (see Overpayments of housing benefit for more on this) as well as rent arrears.

Individual debtors can only submit applications for a DRO via an authorised intermediary after receiving debt advice and providing evidence of income and expenditure. If the applicant meets the qualifying criteria, the application will be accepted by the Official Receiver. Authorised intermediaries are experienced debt advisers who have been authorised by one of the Competent Authorities.  

Competent Authorities have been appointed by the Insolvency Service and include Shelter, Citizens Advice, the Institute of Money Advisers and other organisations. The full list is available from the Insolvency Service together with more information on DROs.

Moratorium from qualifying debts

A moratorium period in relation to each 'qualifying debt' specified in the DRO starts from the date in which the Official Receiver enters details of a DRO onto the Individual Insolvency Register (ie the date of its registration).[7] During the moratorium, the creditor(s) listed in the DRO in respect of qualifying debts 'has no remedy in respect of the debt', unless s/he has the prior leave of the court.[8]

However, the above restrictions do not affect the right of mortgage lenders or other secured creditors to enforce their security.[9]

Possession proceedings during moratorium

The existence of a DRO does not prevent the court from making a possession order against a tenant on the ground of rent arrears (or any other ground). This applies regardless of the tenant's security of tenure. However, where the arrears are listed in a DRO, the court cannot suspend (or postpone) the possession order on terms of the payment of those arrears.

On the other hand, the court can suspend an order for possession on the condition of payment of current rent and costs.[10] When a DRO is made after the making of such a suspended/posponed possession order, the DRO will have the effect only to extinguish the judgment debt up to the making of the DRO, but not any subsequent arrears accrued during and after the moratorium period.[11]

Variation of possession orders during the DRO

If a tenant is subject to a possession order suspended (or postponed) on condition of payment of rent arrears listed in an undischarged DRO, s/he can apply to the court to vary the order so that payment of the arrears is no longer a condition of the possession order (see the Varying or postponing a possession order page for more information on how to apply for a variation of the order).

Secured and excluded debts

Although the debtor will no longer owe the qualifying debts listed in the DRO after the end of the moratorium period, s/he will remain liable for secured debts and excluded debts in respect of which no moratorium exists.

Secured debts include:

  • mortgages and charging orders
  • debts subject to a walking possession agreement, ie goods left in the home by bailiffs for future disposal
  • pawnbroking agreements.

Excluded debts include:

  • magistrates' court fines
  • confiscation orders
  • child support maintenance payments
  • student loans
  • compensation for death or injury
  • budgeting loans and crisis loans [12] (only for DRO applications made on or after 19 March 2012).

New debts

The debtor is responsible for any new debts s/he incurs after a DRO is made. S/he is also responsible for any debts s/he has omitted from the DRO application.

The debtor must continue to pay for on-going commitments while the order is in force.

[1] for the preconditions to be satisfied by an applicant see Sch.4ZA Insolvency Act 1986.

[2] s.251A Insolvency Act 1986.

[3] s.251H Insolvency Act 1986.

[4] s.251L Insolvency Act 1986.

[5] s.251I Insolvency Act 1986.

[6] s.251A Insolvency Act 1986.

[7] r.5A.12 Insolvency Rules 1986.

[8] s.251G(2) Insolvency Act 1986.

[9] s.251G(5) Insolvency Act 1986.

[10] Sharples v Places for People Homes Ltd: Godfrey v A2 Dominion Homes Ltd [2011] EWCA Civ 813.

[11] Irwell Valley Housing Association v Docherty [2012] EWCA Civ 704.

[12] r.5A.2 The Insolvency Rules 1986, as amended by r.3 The Insolvency (Amendment) Rules 2012 SI 2012/469.

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