Debt Relief Order Restrictions Explained

The DRO restrictions at a glance

Six legal restrictions apply for the 12 months of the order, alongside two duties: to co-operate with the Official Receiver and to report changes. The sections below explain each one.

Borrowing £500 or more

You must not take credit of £500 or more, alone or jointly, without first telling the lender that you are subject to a DRO. The figure is a total, so several smaller agreements with the same lender that add up to £500 are caught. Credit includes hire purchase, goods or services paid for later, and a mobile contract where the handset is financed.

The rule rarely bites in practice, because lenders check credit files. Any new debt is not covered by the order, and borrowing you could not repay could lead the Official Receiver to review the DRO.

Bank accounts, overdrafts and cheques

You must tell a bank or building society about your DRO whenever you open an account or apply for an overdraft during the period. Application forms normally ask about bankruptcy, IVAs and DROs, and you must answer truthfully. Banks can refuse a standard current account, but basic bank accounts, which have no overdraft, are widely available. Our bank accounts guide explains why it is best to open one before you apply.

You must also not write a cheque, or set up any other payment, that you know will not be honoured. Cheques are rare now, but the principle covers any payment.

Running a company or a business

Company directors

You must not act as a director of a limited company, or take part in forming, promoting or managing one, unless a court gives you permission. If you make the decisions a director would make, you are managing the company. Anyone who holds a directorship must resign before the DRO is approved.

Sole traders and trading names

Being self-employed is allowed, and business debts from sole trading can be qualifying debts. What you must not do is trade under a name other than the one on your DRO without telling everyone you deal with about the order. Trading in your own name avoids the issue. Business Debtline gives free advice to self-employed people.

Employees and shareholders

Working for a company as an employee is fine, as is holding shares, although shares count towards your £2,000 asset limit. The DRO and employment guide has more detail.

Applying for another DRO

You cannot have another DRO within six years of the approval date of the current one. It matters if new debts build up after discharge. Other solutions, such as bankruptcy or a debt management plan, would still be open to you. See who qualifies for a DRO.

Debt Relief Restrictions Orders and Undertakings

If the Official Receiver believes you behaved dishonestly or irresponsibly before or during the DRO, they can apply to the court for a Debt Relief Restrictions Order (DRRO). The restrictions then continue for a period the court sets, between 2 and 15 years. You can avoid a hearing by agreeing a Debt Relief Restrictions Undertaking (DRRU) instead.

Conduct that can lead to a DRRO or DRRU includes:

• giving away or selling assets below their value in the two years before applying;
• paying some creditors in preference to others;
• gambling or extravagance that contributed to the debts;
• taking on debt you knew you could not repay;
• giving false or incomplete information on the application; and
• failing to co-operate with the Official Receiver or breaking the restrictions.

A DRRO does not restore your debts. The included debts are still discharged at the end of the DRO period. What continues is the set of restrictions, plus a longer entry on the Individual Insolvency Register. Honest disclosure when you apply is the best protection. Our guide on preparing your application explains what the adviser asks.

What happens if you break a restriction

Breaking a DRO restriction is a criminal offence under the Insolvency Act 1986. So is making a false statement in the application, concealing or disposing of assets, or failing to disclose a debt or creditor. The Insolvency Service investigates and can prosecute. A conviction can mean a fine or, for the most serious offences, imprisonment.

Prosecutions are uncommon and aimed at deliberate wrongdoing, not honest mistakes. If you have forgotten a creditor or got a figure wrong, tell your adviser promptly. Failing to report a change can also lead to the DRO being revoked, as our guide to what happens during a DRO explains.

What you can still do during a DRO

During the order you can still:

• work for an employer, change jobs or take on more hours, as long as you report any rise in income;
• be self-employed as a sole trader in your own name;
• rent a home, move house and sign a new tenancy;
• hold a basic bank account and receive wages or benefits into it;
• claim benefits, including Universal Credit, and receive backdated awards, which must be reported;
• own ordinary household goods, clothing, tools for work and one vehicle worth under £4,000; and
• travel, study and volunteer.