About Restrictions on Debt Relief Orders

When you get a debt relief order, you are often able to write off some or all of what you owe, assuming your financial situation doesn't improve within the DRO period. This opportunity isn't a something-for-nothing deal, however. If you file for a DRO, you have to comply with a set of rules known as restrictions.

What You Cannot Do

Current DRO stipulations dictate that, if you want to borrow more than £500, you have to tell the creditor about your order. The intents are to make sure that the creditor understands that you've already got a level of debt that's hard for you to handle, and to discourage you from seeing the debt relief order as an easy way to shirk responsibility for what you owe.

Debt relief order rules also reach into your business and career. You cannot act as a company director during the debt relief period. You also cannot promote, manage or create a business without permission. Even if you do get the okay to lead in these ways, you still must tell the people you do business with that you have the DRO. The same is true if you start to do business under a new name. The rationale here is that, if you're not managing your own funds and meeting related legal obligations well, you might not be able to manage business financial accounts properly, either. The Insolvency Service also believes that honesty about your DRO allows others to make a better education decision about whether you are fit to handle the corporate responsibilities they have for you.

Duration

A typical debt relief order lasts for 12 months. You must follow all the restrictions for the DRO during this period. If you do not do this, or if you are dishonest about your finances, then the Official Receiver--the agent from the Insolvency Service that oversees your case--might get a debt restriction order against you. This order will extend the restrictions from anywhere to 2 to 15 years. For this reason, it is absolutely imperative that, if you want your get the DRO discharged quickly and start reestablishing yourself financially, you work cooperatively with the Official Receiver and strive for a high level of monetary ethics.

If the Official Receiver believes your restrictions should last longer than the standard year, he'll notify you and give you a reason, so the extension should not come as a surprise to you. According to the Citizens Advice Bureau, the debt relief period still officially will end at 12 months even if the restrictions apply for a longer period, and you still can get the debts in your order written off at that point.

DROs, The Individual Insolvency Register and Your Credit Reference File

If you get a debt relief order, it is listed on the Individual Insolvency Register (IIR). This public, online database lists not only debt relief orders, but also similar insolvency information, such as bankruptcies. Your debt relief order will appear on the IIR for 15 months. If you have an additional restriction order, that also will appear for its duration. DROs also appear on your credit reference file for a minimum of 6 years. The fact that DROs are listed on the IIR and your credit reference file means that it is quite difficult to hide the fact you have DRO restrictions to comply with, even if you don't come right out and say to a creditor that you've filed. The inclusion of DROs on your credit reference file also means that, even if the restrictions are lifted after 12 months, it can be very hard to obtain financing.

Comparison to Bankruptcy Restrictions

Bankruptcy and DROs have virtually identical restrictions. This is partly because bankruptcy has been around a lot longer--for hundreds of years--when compared to debt relief orders, which were established in 2007. This enabled the Insolvency Service to turn to bankruptcy as a model for what they wanted to do and provide with DROs, which are designed to function similarly on a much cheaper scale and with a low-income focus.

Conclusion

DRO restrictions prevent you from taking out additional credit or taking certain positions of leadership in business without first getting permission and informing the people you'd work with or borrow from. They can last up to 15 years and appear fairly obvious to others, as DROs are noted on the IIR and your credit reference file. Overall, they are much the same as you'd experience under bankruptcy, as bankruptcy is essentially the framework around which DROs are modeled.

Wanda Thibodeaux the author of this article recommends her readers visit http://www.uswitch.com/debt-help/debt-relief-orders-dro/ for the latest information on debt help and advice.