Are you wondering how a debt relief order (DRO) will affect your home? This article explains how a DRO will affect your property.
Can I apply for a DRO if I have an interest in a property?
A Debt Relief Order is not possible if there is ownership of an asset valued at £300 or more and your beneficial interest in the property means that you own some of the profit in the house.
Will a DRO cause me to lose my home?
A DRO allows someone to fully resolve their debt difficulty. It usually means that there is more money left in the household to pay for the things that are necessary for daily life. If you are no longer required to pay unsecured debts you could have enough money available to pay for rent, food, gas, water and all the other essentials.
If someone is renting a property they can only be asked to leave for very specific reasons, such as non-payment of rent. Some tenancy agreements may have a clause stating that someone cannot live in the property if they are subject to insolvency proceedings. This is relatively rare and it is unlikely that a council would have this clause in their tenancy agreements.
If you are in any doubt or have any worries you can contact the council and ask or discuss your concerns with the approved intermediary who is putting together your application.
My spouse owns a house, can I apply for a DRO?
This depends on your beneficial interest in the property. The Intermediary Guidance requires any beneficial interest in someone else’s property to be calculated as part of the process of assessing against the DRO criteria, which state that property value must be less than £1,000. It may be that you have to provide some proof to the approved intermediary that you have no beneficial interest in the property before they can submit the application.
Can I apply for a DRO if my home has £0 equity?
Unfortunately, the rules on who can enter a DRO are very strict. This is because Government indented the DRO to be a simplified version of Bankruptcy for straightforward insolvency cases where no assets were involved. Even if your home is in negative equity, you are still not eligible. You need to meet the following criteria to qualify:
- Be unable to meet your debt repayments as they fall due
- Owe less than £15,000 in qualifying debts (these are any unsecured debts excluding court fines, new student loans and child maintenance)
- Have less than £50 available to offer to your creditors each month (after essential living costs and priority debts have been taken into consideration)
- Have less than £300 in non-vehicle assets (including savings)
- Not have a vehicle with a value in excess of £1,000
If you’re insolvent and have no equity in your home, it sounds like you should explore Bankruptcy. Whilst your home is at risk in Bankruptcy, the Official Receiver will only look at a forced sale if there is equity available to release to your creditors.