Debt relief orders and possession

Where a person has a DRO they cannot be made to make payments towards any debts included in it during the moratorium period of the order. At the end of the period those debts are written off, except for debts obtained by fraud.

A DRO application falls under the jurisdiction of the Insolvency Service. The rules are very similar to bankruptcy. The DRO applicant goes through their situation in detail with an approved debt adviser, called an Authorised Intermediary. The Intermediary is required to assess the circumstances and provide all the relevant information to the Insolvency Service.[1]

Financial limits

A DRO can be made where the applicant's:[2]

• debts to not exceed £50,000

• income (after essential expenditure) does not exceed £75 per month

• assets (apart from exempt assets) do not exceed £2000 in total

Rent arrears must be included in the debt financial limit.

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'[3] Benefit overpayments are specified in a DRO as qualifying debts (see Overpayments of housing benefit) as well as rent arrears.

DRO conditions

A DRO lasts generally for 12 months, unless revoked or extended.[4] At the end of this period, if the DRO has not be revoked,[5] the debtor will be discharged from the qualifying debts specified in the DRO.[6]

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 .[7] During the moratorium, the creditors listed in the DRO in respect of qualifying debts have 'no remedy in respect of the debt', unless they have the prior leave of the court.[8]

The restrictions on creditors do not affect the right of secured creditors to enforce their security.[9]

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).[10] This applies regardless of the tenant's security of tenure. 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.

The court can suspend an order for possession on the condition of payment of current rent and costs.

When a DRO is made after the making of a suspended 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 on condition of payment of rent arrears listed in an undischarged DRO, they can apply to the court to vary the order so that payment of the arrears is no longer a condition of the possession order. 

If the terms of the suspended order require payment of arrears up to the surplus income level (currently £75 per month), it does not have to be varied. The Insolvency Service will permit payments up to this level towards rent arrears to avoid the loss of a tenancy. 

Read more about varying a possession order.

Although the debtor is not liable for the qualifying debts listed in the DRO after the end of the moratorium period, they remain liable for secured debts and excluded debts in respect of which no moratorium exists.

Excluded debts include:[12]

• magistrates' court fines

• confiscation orders

• child support maintenance payments

• student loans

• compensation for death or injury

• budgeting loans and crisis loans (only for DRO applications made on or after 19 March 2012).

New debts

The debtor is responsible for any new debts they incur after a DRO is made. They are also responsible for any debts they have omitted from the DRO application.