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Debt Relief Orders - Information for creditors

What is a debt relief order (DRO)?

DROs provide debt relief, subject to some restrictions. They are suitable for people who do not own their own home, have little surplus income and assets and less than £15,000 of debt.  

An order lasts for 12 months.  In that time creditors named on the order cannot take any action to recover their money without permission from the court.  At the end of the period, if the debtor’s circumstances have not changed, they will be freed from the debts that were included in their order. 

If you are a creditor and your debt is listed as a debt in a DRO the official receiver will send you a formal notice informing you that a  DRO has been made.

You can see if someone who owes you money is subject to a DRO by looking at the Electronic Individual Insolvency Register (EIIR) at http://www.insolvency.gov.uk/eiir/ .

Effect of the DRO

While the DRO is in force your debt will be subject to a moratorium. During this time you may not continue or start any legal action against the debtor for repayment of the debt owed to you, without the permission of the court.

This moratorium will normally last for one year but may sometimes be extended.

After the end of the moratorium period the debt owed to you is discharged so you may not take any action for repayment of the debt.

If the debt is a joint debt you can take action for repayment from any other joint debtor, unless they too are subject to a DRO or other insolvency process.

If the moratorium is extended, or ended early, or if the DRO is cancelled, you will be sent notice by the official receiver.

If the moratorium is ended early, or the DRO is cancelled, the debtor will no longer have the protection of the moratorium or discharge and you will be free to take action for repayment of your debt.

Lodging an objection

If you receive notice that your debt is listed in a DRO you may lodge an objection to one of three things:

  • the making of the DRO;
  • the inclusion of your debt in the DRO;
  • the details of your debt specified in the DRO.

The grounds for your objection can be one or more of:

  • that information supplied by the debtor, or in support of the debtor’s application, was incomplete, incorrect or misleading;
  • that a bankruptcy order has been made against the debtor;
  • that the debtor has made a proposal for an individual voluntary arrangement;
  • that the official receiver should not have been satisfied  that the debtor met the qualifying criteria for a DRO at the time of the application;
  • there is an error in, or omission from, something listed in the DRO.

You must lodge your objection with the official receiver within 30 days of being notified of the DRO and must:

  • give your full name and address and supply the name of the debtor and reference number of the DRO;
  • specify which of the three matters you are objecting to;
  • give details of the grounds for your objection;
  • supply a clear statement of the facts and supporting evidence upon which you are basing your objection.

Reporting misconduct

Although the grounds for objecting to a DRO are quite strict, the official receiver will always consider any evidence from creditors detailing misconduct regarding the debtor’s dealings or property, or suggestions for further explanation or enquiry.

Examples of useful information would be if you have information previously unknown to the official receiver, which identifies undisclosed assets or debts, or about the debtor’s behaviour.

Examples of the type of behaviour which may result in further action being taken are:
  •  non-disclosure or removal of assets;
  •  dishonesty in obtaining credit;
  •  failure to keep or produce records which account for losses during the 2 years prior to the DRO;
  •  disposal of assets at less than their value resulting in a loss to creditors;
  •  payment of some creditors in preference to others;
  •  excessive pension contributions;
  •  failure to supply goods or services wholly or partly paid for, resulting in a loss to creditors;
  •  incurring debts (as an individual or a trader) which they had no reasonable prospect of paying;
  •  gambling, rash and hazardous speculation or unreasonable extravagance which has materially contributed to or increased the debt;
  •  neglect of business affairs which may have materially contributed to or increased the extent of the debts;
  •  fraud or fraudulent breach of trust;
  •  failure to co-operate with the official receiver.

This list is not exhaustive. If you know of any misconduct by the debtor which you think may have contributed significantly to their insolvency, please put this in writing to the official receiver, together with copies of any supporting documentation.

VAT bad debt relief

If you are or have been registered for VAT and wish to claim VAT bad debt relief, please refer to VAT leaflet 700/18/91 “Relief from VAT on bad debts” available from HM Revenue and Customs http://www.hmrc.gov.uk/manuals/insmanual/INS12601.htm

Further information

Further information about DROs and the role of the official receiver is contained in the booklet “A Guide to Debt Relief Orders” (available in hard-copy on request).

Contact address:

The Debt Relief Order Unit
Insolvency Service
1st Floor, Cobourg House
Mayflower Street
Plymouth
PL1 1DJ
 

Tel: 01752 635200
Fax: 01752 635222

Email: DRO.Unit@insolvency.gsi.gov.uk

 
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