Treatment of disability benefits and premiums in a DRO

A disability benefit is paid by the DWP or another government agency to cover the extra costs of living with a disability.

When a debt relief order (DRO) approved intermediary completes a debtor's DRO application they fill out the debtor's income and expenditure.

During this process, the debtor may inform the intermediary that they receive a disability benefit. This could be:

• Personal independence payment (PIP)

• Disability living allowance (DLA) for an adult or child

• Attendance allowance

• Constant attendance allowance under the Industrial injuries or War pensions schemes

• War pensioners' mobility supplement

• Armed forces independence payment

A debtor who receives a disability benefit could also receive a disability premium within another benefit. This could apply where the debtor is receiving:  

• Working tax credit 

• Child tax credit 

• Housing benefit 

• Employment and support allowance (ESA) 

• Job seekers allowance (JSA) 

• Income support 

• Pension credit 

The approved intermediary can check if the debtor is receiving a disability premium by requesting a breakdown of their entitlement from the benefit provider.

Universal credit elements

Elements for limited capability for work and work-related activity in universal credit are not classed as disability premiums.

If a debtor is receiving universal credit and previously had an entitlement to a severe disability premium within another benefit, they may be receiving a transitional payment.  

Transitional payments are treated in the same way as disability premiums.  

To qualify for a DRO, the debtor's surplus income after their essential expenditure must not exceed £75 per month.[1]

Ongoing payments of disability benefit or a disability premium can be offset on the income and expenditure form. This means the approved intermediary includes the amount of the regular payment in the application as income and reflects the same amount as an expense under the heading adult care costs.

Increases in benefit income

The debtor must notify the official receiver if they start to receive a disability benefit or premium, or their current benefit payment increases during the moratorium period.[2]

An increase in the debtor's income during the moratorium period because they began to receive a disability benefit or premium will not lead to the revocation of the DRO. This also applies if their current entitlement to a disability benefit increases.

To qualify for a DRO the debtor must not have assets totalling more than £2000.[3]

Lump sums received before the DRO

A lump sum of backdated disability benefit or disability premium received before the moratorium period starts can be disregarded when considering the asset limit.

Lump sums received during the DRO

If the debtor receives a lump sum of a disability benefit or disability premium during the moratorium period they must notify the official receiver.[4]

A lump sum received during the moratorium will not lead to revocation of the DRO as long as it does not change character. For example, a debtor cannot use the lump sum to purchase a vehicle worth more than £2000 as this would put them over the asset limit.

Lump sums paid in monthly instalments

Some backdated benefit payments can be paid in monthly instalments.[5] These payments are income for DRO purposes.

Find out more about income and expense limits for debt relief orders.