Debt Relief Order- Pros and Cons

by Susan Paige on February 11, 2019 · 0 comments

The debt relief is for people who don’t have enough income to pay off the debt. It is a type of insolvency which is suitable for people with low income. The debt relief order works by freezing the deficit for one year. The freezing of the debt continues if the debtor’s financial conditions don’t change.

The few characteristics of DRO make it similar to bankruptcy due to which it is also regarded as mini bankruptcy. There are a number of pros and cons of this system which we are going to discuss here in detail.

Pros:

As a matter of fact, there are plenty of benefits because of which people prefer debt relief order over a debt management plan.

  1. It is complete inexpensive for the debtor to enter into this process. People who want to escape from the debt are always in search of some easy and cheap methods that help them pay off the debt without having to face too high cost. The debt relief order ensures that debtor pays only a small amount and enters into this process.
  2. After entering the system of debt relief order, all the charges, debt and other payments get frozen for a specific amount of time. So, a person faces no cost ever after entering the DRO.
  3. One of the biggest fears of the debtor is the legal issues that he may face due to not being able to make payment of the debt. The creditor often files the case against the debtor when he does not pay off the debt. The debt relief order does not let the creditor take any legal action against the debtor. Moreover, the debtor also saves himself from the threats of legal actions from the creditor
  4. The biggest benefit due to which people opt for DRO is saving the debtor as quickly as possible. As soon as the debtor enters the debt relief order process, it starts working and makes the person completely debt free at least for one year. The person becomes totally stress-free because of getting relief

Cons:

Although there are plenty of advantages of using the DRO, there are also some cons due to which one should be very careful while choosing the DRO. These cons are actually obstacles that prevent people from entering DRO. Some of the key disadvantages are:

  1. The debt relief order has very limited use. There are certain types of people who cannot get into the DRO. For example, the house owners cannot use this process to save themselves since the house is the asset that they can use to pay off the debt. Not only house owners, but anyone who is low in assets cannot apply for the DRO.
  2. There is a specific amount of income above which, DRO is not applicable. So, if you are earning much but finding it hard to make both ends meet, you will not be able to get DRO, and you will have to pay the debt at any cost.
  3. There is another limitation of DRO that makes it very limited in use. Only those people can apply to DRO who reside in England. If you are living in the country other than England, you can go for some other options to get relief
  4. Although the DRO freezes the debt to be paid for one year and helps the debtor become completely debt free after one year, the credit ratings of the person get too low for the next six years. This means the person who has availed the DRO will not be able to get any type of loan for the next six years no matter what.
  5. There are some types of debts, which are not covered by the DRO which means despite entering into DRO, a person will have to pay the money since not all the debts are frozen.

The bottom line:

The debt relief order is very beneficial for people with low income. However, it comes with some shortcomings and limitations. There are many reasons for people to apply for DRO and also many reasons to be careful while applying. One should consider both the pros and cons and then make a decision.

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