Debt Relief Order vs Debt Management Plan – Comparison

debt relief order vs debt management plan

It’s not uncommon for people suffering from debt to be confused about which debt solution to go for in the UK.

A Debt Relief Order (DRO) and a Debt Management Plan (DMP) are two debt solutions that are appropriate for very different financial circumstances. 

Today, I’ll be comparing the two and determining which solution you should go for depending on your financial situation. 

How does a Debt Relief Order Work? 

A DRO is a formal and legally binding agreement between you and your creditors. 

When you first apply for a DRO, your DRO advisor and the official receiver assess your financial circumstances to determine whether you qualify for a DRO or not. I’ll go over the eligibility criteria for a DRO later in this post. 

Once a DRO gets approved, all of your payments towards your debts are halted. The next 12 months are called the ‘moratorium period’. During this period, you are required to actively seek job opportunities to try and improve your financial circumstances. 

Once the moratorium period is over, your financial situation is assessed once again. If it’s determined that it has not improved and you’re still unable to pay back your debts, then your debts are written off. 

Please note that your creditors cannot pursue any legal action against you during the moratorium period. 

However, if it has indeed improved, then you will be required to pay back your debts. 

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Debt relief orders are often referred to as cheaper and quicker alternatives to bankruptcy. A bankruptcy usually takes about three years to complete whereas you can be done with a DRO within a year. 

You don’t even have to make any payments towards your debts when you’re in a DRO and these debts get written off once your moratorium period ends. 

Taking all of these factors into account, debt relief orders seem like the best debt solution there is. So, why doesn’t everyone that’s suffering from debt problems opt for this debt solution? 

Well, that’s because the eligibility criteria for qualifying for a DRO are extremely strict. 

DROs are typically aimed towards people that live in low-income households and have little to no assets to their name. 

It’s important to note that most types of debts can be included within DROs including priority debts such as council tax arrears. 

When you enter into a DRO, your name gets added in the Insolvency Register that is maintained by the Insolvency Service. 

Having your name in the Insolvency Register can prevent you from obtaining different facilities and can also cause difficulties during borrowing, renting, etc.

Eligibility Criteria for a DRO 

In order to be eligible for a DRO, you must: 

  • Have debts that total up to no more than £30,000
  • Have a disposable income of less than £75. Your disposable income is defined as the amount of money you have left after you’ve made priority payments including essential household expenses
  • Have resided or worked in England or Wales for the past three years
  • Own assets that total up to no more than £2,000 in value
  • A £1,000 increase in the value of a car to £2,000 (this is in addition to the general assets you can have.)
  • Not have had a DRO in the past six years.

If you fulfil all of these criteria, then you can apply for a DRO. 

Please note that even if you fulfil all of these criteria, it does not guarantee that your DRO will be approved. 

When applying for a DRO, you have to submit a non-refundable application fee of £90. This means that you will not get your £90 back even if your DRO application is rejected. 

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How does a Debt Management Plan (DMP) Work? 

Debt management plans are considered to be one of the most flexible debt solutions available in the UK. 

A debt management plan is an informal agreement between you and your creditors. It states that you will keep making monthly payments towards your debts at a reduced rate that is affordable to you. 

You will keep making these monthly payments until your debt is paid off in full. 

Unlike a DRO, debt management plans do not protect you from legal action against your creditors. 

Please note that unlike in a DRO, priority debts cannot be included within a DMP.

Even if your creditors have agreed to enter into a debt management plan with you, they can change their mind any time and legally pursue court action against you. 

A DMP is a debt solution that you can opt for when you have unsecured debts and you don’t fulfil the criteria required for getting a DRO. 

Since a DMP is an “informal” agreement, you are not considered to be formally insolvent if you enter into it. This means your name is not entered into the insolvency register like it is when you enter into a DRO. 

A DMP does have a significantly negative impact on your credit score since you are making reduced payments towards your debts. 

These reduced payments get recorded within your credit record. They are typically flagged as being part of a DMP inside your credit file so anyone performing a credit check can know that they were reduced as part of a debt solution. The record of every payment stays in your credit file for six years after the date on which it was logged.

Unlike DROs, a DMP has barely any eligibility criteria. Since it’s an informal agreement, you can opt to apply to get one no matter what level of debt you have. 

That being said, you’ll definitely have to keep in mind the fact that if you suggest a payment offer that is too low to your creditors, then they’re not going to agree to your DMP

So, while a DMP doesn’t have any concrete eligibility criteria, there are certainly some conditions that you have to look out for. 

If you feel that you can’t fulfil the criteria for a DRO but feel that your DMP might also not be accepted given your financial circumstances, I suggest that you contact a professional for debt advice. 

Contacting a debt charity such as Stepchange or National Debtline can be a very good idea. They have trained professionals that will give you great advice about which debt solution to go for. 

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DROs and DMPs are two debt solutions that are aimed towards different types of people. 

A DRO is a formal solution where you don’t have to pay anything but it has strict eligibility criteria. It’s mainly aimed towards individuals with little to no income and little to no assets.

On the other hand, a DMP can be suitable for a wide variety of individuals with both low as well as high levels of debt.


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  • Affordable repayments with an end date in sight
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring