One of the things your adviser will do as part of the debt relief order (DRO) application process is to assess your income, debts and belongings. This is to check whether you meet the criteria in each of these areas before you apply.
This page explains how your income, debts and belongings are assessed by a DRO adviser.
What are the DRO criteria?
Check if you can get a DRO after the rules change
The government has said the rules for getting a DRO will change from 28 June 2024. From this date:
you might be able to get a DRO if you owe £50,000 or less
if you have a vehicle worth less than £4,000, you don’t have to include it in your assets
If you owe between £30,000 and £50,000 you might want to wait and apply for a DRO after the rules have changed.
To be eligible for a DRO, you need to meet all of the following criteria in these areas:
Income: you need to have £75 or less left over each month after paying your normal household expenses.
Debts: the total of your debts should be £30,000 or less, or £50,000 or less from 28 June 2024 – although some types of debt don't count towards this limit.
Belongings: any belongings of value you own or savings you have should be worth less than £2,000.
If you have a vehicle worth less than £2,000 – or £4,000 from 28 June 2024 – you don’t have to include it in your assets. If your vehicle is worth more than £2,000, you don't have to include it in your assets if it's been adapted because you have a disability. You can only exclude 1 vehicle from your assets and you can't exclude it if you only use it for work.
Remember, there are other criteria about your personal circumstances which you must also meet to be eligible.
More about the criteria for a DRO
How your income is assessed
Your DRO adviser will work out how much spare available income you've got, looking at all the money you've got coming into your household. This could include:
your salary or wages
welfare benefits, such as jobseeker's allowance and employment and support allowance, although if you get disability living allowance the amount you get can automatically be counted as necessary spending
any income you get from a pension
any contributions other people, such as family members, make to your household expenses
any rental income.
You will be able to deduct a reasonable amount for your household expenses. If the figure left over each month is £75 or less, you will be able to apply for a DRO, if you meet the other conditions.
How your debts are assessed
Your DRO adviser will work with you to put together a list of all your debts, including:
amounts owed on credit agreements such as credit cards or loans
rent arrears
council tax, income tax and utilities arrears
benefit overpayments
arrears of hire purchase payments.
If the total of all these debts comes to £30,000 or less – or £50,000 or less from 28 June 2024 – you'll be able to apply for a DRO if you meet the other conditions.
Joint debts
The full amount of any debts you share jointly with another person must be included in your application. They will count towards the limit. However, only the person with the DRO will be released from responsibility for the debt at the end of the DRO period. This means the other person can still be chased for the debt.
Top tip
Never lie or hide the truth about any aspect of your income, debts or assets when applying for a DRO. It is a criminal offence to knowingly put incorrect information or deliberately leave out information on a DRO application.
If the official receiver finds you've acted dishonestly or got a DRO fraudulently, it could be stopped and you could have restrictions made against you by the court. You may be prosecuted, which could lead to a fine, or even prison.
More about debt relief restrictions orders
How your belongings are assessed
You won't be able to apply for a DRO if you have more than £2,000 in 'assets'.
Your assets include cash, shares and money in bank accounts or savings. They also include money you’re owed, unless you can’t get it back from the person who owes it.
Money you need to pay your household expenses isn’t included in your assets.
Your assets also include most items you own, like:
antiques
jewellery, not including wedding rings
buildings or land
other items of value you own, including mobile phones
Assets don't include:
household equipment such as bedding, clothing and furniture
tools, books and other items of equipment you use in your job or business
most kinds of pension funds, unless you can access the money now – check with your DRO adviser whether your pension funds are counted as assets or not
Vehicles you own
Your car, van or motorbike won’t count as an asset if it’s adapted because you have a disability.
Your car, van or motorbike won’t count as an asset if it’s worth £2,000 or less – or £4,000 or less from 28 June 2024. You can check what your vehicle is worth on the Parkers website.
Only 1 vehicle won’t be counted, and you’ll need to drive it for personal use at least some of the time – not just for business.
Vehicles on hire purchase
If you've got a vehicle you're paying for on a hire purchase (HP) or conditional sale agreement, it won't be counted as an asset. This is because it doesn't belong to you until you've made all the payments on the agreement. However, you may not be allowed to keep making the payments while the DRO is in force.
Even if you're not behind on HP payments, your lender may be allowed to re-possess your vehicle anyway. This is because some HP agreements include a clause which automatically lets the lender end the agreement and re-possess your vehicle if you enter any kind of formal insolvency arrangement, including a DRO.
If your car is subject to a Motability HP agreement, you may be able to transfer to Motability's lease hire scheme instead.
Check with your DRO adviser, who can help you work out whether getting a DRO would mean you would lose your vehicle.
If you don't qualify
If any aspect of your income, debts or assets means that you don't qualify for a DRO, you'll need to think about choosing a different debt solution.
If you owe between £30,000 and £50,000, it might be worth waiting to apply for a DRO after the limit changes to £50,000 on 28 June 2024.