A lot of people end up with serious debt problems and need to be declared insolvent – but bankruptcy isn’t right for everyone in that situation. Every year, many thousands of people enter a DRO (Debt Relief Order) or an IVA (Individual Voluntary Arrangement).

For struggling borrowers in England and Wales, bankruptcy hasn’t been the only available form of individual insolvency since 1986, when IVAs were introduced.

In 2009, the situation changed again, with the introduction of the DRO.

What is a DRO?

A DRO is a form of insolvency that was introduced to help people in a very specific kind of situation – with very little in the way of income or assets, and relatively low debts. If you don’t fit the criteria, a DRO simply won’t be available to you. You can find more on the requirements of a DRO here.

Basically, a DRO, if it goes ahead, will last for 12 months. If your circumstances haven’t changed in that time, you’ll be freed from all the debts included in the DRO.

DROs don’t actually involve the courts, but are run by The Insolvency Service itself, working with skilled debt advisers who are known as ‘approved intermediaries’.

How common are DROs?

As mentioned, DROs were only introduced in 2009, but they’ve seen a serious uptake already. Last year, for example, over 25,000 people entered a DRO – far more than the almost-12,000 who entered a DRO in the three quarters of 2009 in which they were available.

Given that over 59,000 people entered bankruptcy and over 50,000 entered an IVA, the figure of 25,000 DROs accounts for about 19% of last year’s total insolvency figure of just over 135,000.

The thought of getting out of debt in just one year can be really appealing to many people – especially when their financial situation is poor and unlikely to improve – but don’t forget it’s a form of insolvency. It’ll stay on your credit rating for six years, which will make it harder to obtain further credit, since potential lenders will be able to see you’ve not been able to repay your debts, but entered a DRO.

Where are DROs available?

DROs are only available to people in England and Wales. People in Scotland might be able to take the LILA (Low Income Low Asset) route into bankruptcy, or they might be eligible for a Trust Deed, which is similar in some ways to an IVA.

People in Northern Ireland might have the option of entering bankruptcy or an IVA, but the DRO is not available in Northern Ireland.