Debt relief restrictions and DRROs

A debtor is subject to restrictions during the debt relief order moratorium and for an extended period if a debt relief restrictions order or undertaking is in place.

This content applies to England & Wales

Standard restrictions during the DRO moratorium

All debtors are subject to certain restrictions during their debt relief order moratorium. Restrictions apply to obtaining credit, carrying on business, and holding certain offices.

The debtor must explain that they are in a DRO moratorium to comply with rules that require the debtor to tell creditors and business associates about the DRO. They must also explain that they are under a debt relief restrictions order if appropriate.[1]

Obtaining credit

The debtor must not obtain credit of more than £500 without telling the creditor that they are currently in a DRO.[2] This restriction also applies if they obtain credit jointly with another person. 

Engaging in business

The debtor must not engage in business in a name other than the one on the Individual Insolvency Register, without telling everyone they enter into a business transaction with about the DRO.[3]

Holding public offices

The debtor cannot hold certain public offices or legal powers during a DRO moratorium.

The debtor cannot be a trustee of:

  • a charity[4]

  • a pension scheme[5]

The debtor cannot be appointed or continue as a:

  • registrar[6]

  • donee of a lasting power of attorney for a person's property and affairs[7]

  • member of a regional flood and coastal committee[8]

  • account manager for an Individual Savings Account[9]

  • fiscal representative for an aircraft operator[10]

  • chairman of an agricultural tribunal[11]

The debtor cannot hold a licence for:

  • premises providing alcohol or entertainment[12]

  • operating gambling activities[13]

  • operating a public services vehicle[14]

The debtor is prevented from exercising the right to buy their council property.[15]

Effect of a DRO on employment

A debt relief order can impact certain types of employment and the ability to hold public offices. Some professional bodies prevent their members from practicing whilst insolvent, including during a DRO moratorium.

Debtors who are considering applying for a DRO should check their employer's policy, especially if they are aware that credit checks are performed. This could apply to people working in banks and financial services.

Police officers should check their force's policy for dealing with debt problems before proceeding with a DRO application.

Employees of the Nuclear Decommissioning Authority and the Civil Nuclear Police Authority should check their employment is not affected by a debt relief order.[16]

Professions that cannot be practised during the moratorium

Professions that cannot be undertaken during the moratorium include working as a:

  • solicitor[17]

  • insolvency practitioner[18]

  • receiver or manager of a property on behalf of creditors[19]

  • estate agent[20]

  • MOT examiner[21]

People in other legal or professional roles should check their regulatory codes before they apply for a DRO. This could apply to:

  • barristers

  • certified accountants

  • chartered accountants

  • chartered surveyors

DRO intermediary status

A debtor in a DRO moratorium or subject to a debt relief restrictions order is not a fit and proper person to be a DRO intermediary.[22]

Debt relief restrictions orders and undertakings

A debt relief restrictions order (DRRO) is a court order that extends the DRO restrictions for longer than the moratorium period. 

The Official Receiver can apply to court for a debt relief restrictions order if they believe the debtor has:[23]

  • failed to keep records that account for loss of property

  • paid off one creditor ahead of others, to put them in a better position (known as a preference)

  • given away money or property for less than it’s worth (known as a transaction at undervalue)

  • taken out debts they had no reasonable expectation of being able to pay

  • gambled away money or engaged in rash or hazardous speculation

  • committed fraud

  • failed to cooperate with the Official Receiver

This is not an exhaustive list. The court can take other types of conduct into account, including things not specifically mentioned in the legislation. 

A debt relief restrictions order can last for two to fifteen years.[24] The court can consider behaviour that occurred before and after a DRO is made. It cannot take into account behaviour before the legislation came into force.[25]

Debt relief restrictions orders and debt relief restrictions undertakings are recorded on the individual insolvency register (IIR). They are displayed on the Bankruptcy Restrictions Search Facility for a period of 3 months, and notifications could appear in a press release.[26]

Debt relief restrictions undertaking

A debt relief restrictions undertaking (DRRU) can be proposed by either the debtor or the Official Receiver. It avoids the matter going to court for a debt relief restrictions order.[27] The debtor promises not to do the things specified in the undertaking. The terms of the DRRU can be negotiated between the debtor and the Official Reciever.

Interim debt relief restrictions order

The court can make an interim debt relief restrictions order (IDRRO) at any time between the DRO application date and the determination date. The court can make an IDDRO if it is highly likely that an application for a DRRO will be successful, and that it is in the public interest.[28]

An IDRRO has the same effect as a DRRO and comes into force when it is made. It continues until either the:

  • determination of the application for a DRRO

  • acceptance of a DRRU

  • court discharges the IDRRO

Effect of restrictions orders on MPs and councillors

A debtor who is a Member of Parliament or a member of the House of Lords is disqualified if a debt relief restrictions order is made.[29]

A debtor is disqualified from being elected to or continuing to be a member of a local authority if they are subject to a debt relief restrictions order.[30]

Revocation of the debt relief order

A DRO could be revoked by the official receiver if the debtor did not meet the qualifying conditions when they applied or ceased to meet them during the moratorium. The DRO could also be revoked if the debtor provided incorrect or incomplete information in their application.

The revocation of the debt relief order does not affect an application for a DRRO, or the acceptance of a DRRU, unless the court orders otherwise.[31]

Last updated: 27 June 2022

Footnotes

  • [1]

    s.251S(2) Insolvency Act 1986.

  • [2]

    s.251S(1)(a) Insolvency Act 1986.

  • [3]

    s.251S(1)(b) Insolvency Act 1986.

  • [4]

    s.178(1) Charities Act 2011.

  • [5]

    s.29(1)(ba) Pensions Act 1995.

  • [6]

    reg.5(a)(ia) Registration of Births, Deaths and Marriages Regulations 1968.

  • [7]

    s.10(2) Mental Capacity Act 2005.

  • [8]

    reg.1(a) Regional Flood and Coastal Committees (England and Wales) Regulations 2011.

  • [9]

    reg.20(1)(ba) Individual Savings Account Regulations 1998.

  • [10]

    reg.7(2)(da) Air Passenger Duty Regulations 1994.

  • [11]

    para 13(4) sch.9 Agriculture Act 1947.

  • [12]

    s.27(1) Licensing Act 2003.

  • [13]

    s.114(1)(c) Gambling Act 2005.

  • [14]

    s.57(2)(b) Public Passenger Vehicles Act 1981.

  • [15]

    s.121(2)(e) Housing Act 1985.

  • [16]

    para 1 sch.1 Energy Act 2004.

  • [17]

    s.15(1) Solicitors Act 1974.

  • [18]

    s.390(4)(aa) Insolvency Act 1986.

  • [19]

    s.31(1)(aa) Insolvency Act 1986.

  • [20]

    s.23(1A) Estate Agents Act 1979.

  • [21]

    reg.9 Motor Vehicles (Tests) Regulations 1981.

  • [22]

    reg.9(h) The Debt Relief Orders (Designation of Competent Authorities) Regulations 2009.

  • [23]

    para 2(2) sch.4ZB Insolvency Act 1986.

  • [24]

    para 4(2) sch.4ZB Insolvency Act 1986.

  • [25]

    art.2 Tribunals, Court and Enforcement Act 2007 (Commencement No 7) Order 2009.

  • [26]

    r.11.20 Insolvency (England and Wales) Rules 2016.

  • [27]

    para 7 sch.4ZB Insolvency Act 1986.

  • [28]

    para 5 sch.4ZB Insolvency Act 1986.

  • [29]

    s.426A Insolvency Act 1986.

  • [30]

    s.80(1)(b) Local Government Act 1972.

  • [31]

    para 7(10) sch.4ZB Insolvency Act 1986.