What Happens If Your Circumstances Change During a DRO?

Your duty to report changes

When you applied, you agreed to tell the Official Receiver about any change in your circumstances during the DRO period. This is a legal duty, not a courtesy. Failing to report a change is treated far more seriously than reporting it promptly.

You can write to the Insolvency Service directly, but most people go back to the approved intermediary who made the application. If you have lost touch with your adviser, any of the free advice organisations can help.

If you are not sure whether something counts, report it anyway. A reported change that turns out to be irrelevant costs nothing. An unreported one can cost you the order.

Which changes you must report

The test is whether the change could affect any eligibility criterion. Those are spare income under £75 a month, assets under £2,000, no interest in property and qualifying debts under £50,000.

What the Official Receiver can do

The Official Receiver reassesses your eligibility using the new information, with three broad outcomes.

1. Nothing changes

   If you still meet every criterion, the DRO continues as before. A modest pay rise that leaves you under £75 a month spare often falls into this category.

2. The DRO period is extended

   The Official Receiver can extend the moratorium beyond 12 months where more time is needed to look into the change. Your debts stay frozen meanwhile.

3. The DRO is revoked

   If you clearly no longer qualify, for example because an inheritance puts your assets well over £2,000, the Official Receiver can revoke the order. You will be told in writing and can respond first.

Creditors listed in the order can also object where they believe your circumstances have improved. The Official Receiver considers any objection as part of the same reassessment. For the day-to-day rules while the order is in force, see what happens during a DRO.

What revocation means

Revocation ends the DRO before the debts are discharged, with serious consequences.

• The included debts come back in full, and creditors may add the interest and charges frozen during the order.
• Creditors can contact you, take court action and use enforcement again.
• The DRO stays on your credit file for six years from approval, and the Individual Insolvency Register records the revocation.
• You cannot apply for another DRO for six years from the original order.

Revocation is not the end of the road. If your circumstances have improved enough to lose the DRO, you may now be able to afford a debt management plan or an IVA. If not, bankruptcy may be an option. Go back to an approved adviser as soon as revocation is raised. Our comparison of other debt solutions outlines the alternatives.

If things get worse

A DRO is designed for people whose finances are already at their lowest, so a change for the worse rarely threatens the order. The difficulty is more often the debts that build up afterwards.

New debts cannot be added

The DRO covers only the debts listed in it at approval. Anything you owe after that date, including rent and council tax that fall due during the year, cannot be added and must be paid. Borrowing £500 or more without telling the lender about your DRO breaks the DRO restrictions.

Keep priority bills first

If money is short, pay rent, council tax, energy and any court fines before anything else, because falling behind on these has the most serious consequences. If a new priority debt is becoming unmanageable, speak to an adviser early.

Losing your job or becoming ill

Losing a job or having your hours cut does not affect eligibility, because the income test has a ceiling, not a floor. Tell the Official Receiver and your adviser, claim any benefits you are now entitled to, and ask for a fresh budget.

A new illness or disability does not threaten the order either. Extra health costs count as reasonable expenses, and a vehicle adapted for a disability is disregarded whatever its value. If you cannot manage correspondence, ask the Insolvency Service to deal with a family member or your adviser instead.

Moving home or abroad

Moving within England or Wales changes nothing as long as you remain a tenant. Update your address with the Insolvency Service so that letters reach you. Buying a home, or being added to someone else's, would normally lead to revocation.

Moving abroad during the DRO period is allowed. The order does not end because you leave the country, but you must tell the Official Receiver where you are and keep co-operating with enquiries. Debts owed to lenders outside England and Wales may not be bound by the order, so take advice before you go.

If the person with a DRO dies

A DRO is personal to the individual and ends on their death. The debts and any assets they leave are then dealt with under the ordinary rules for a deceased person's estate. Relatives are not responsible for the debts simply because they are family, but joint debts and jointly owned items can be affected.

If you are dealing with the affairs of someone who had a DRO, tell the Insolvency Service and take advice before paying any creditor.