Debt Help on Benefits: Can You Get a DRO on Universal Credit?

When you have debts and are getting benefits, you might feel like things are out of control and wonder which types of financial support might be open to you. If you want to know about having a DRO on Universal Credit, you might be questioning yourself if you getting benefits has any impact on your ability to apply for one.

However, being on Universal Credit does not necessarily mean that you cannot apply for a DRO as long as you meet the requirements.

Debt Relief Order is a tool for people with low income and low assets whose debts will be covered by such an order. The DRO can provide legal protection from creditors as well as write off certain amounts of debts after a specific period of time, if eligible.

This article will tell you who can apply for a DRO on Universal Credit, what kind of debts might be covered, how you should apply, and what else might work better than a Debt Relief Order in your case.

What Is a DRO on Universal Credit?

Debt Relief Order (DRO) is one of the formal ways of debt management that exists in England and Wales. This order is aimed at giving some temporary protection from the creditors and an ability to write off the qualified debts within 12 months of the moratorium, if the financial situation of the person will not change.

DRO on Universal Credit means that a person gets the Debt Relief Order and he or she receives Universal Credit as a part or as the total amount of his or her salary. 

The receipt of Universal Credit does not preclude the individual from obtaining the DRO. There are many people who receive this benefit, but there is not any restriction regarding the possibility of obtaining a DRO because the financial situation of the person is taken into consideration.

DRO on Universal Credit is designed for those people who find it hard to pay back their debts and who have no additional income left. This method can be beneficial for those people who have managed to accumulate the debts, like a credit card balance, personal loan, overdraft, council tax arrears, utilities bills and other debts, but they cannot manage to pay back these amounts.

Can You Get a DRO on Universal Credit?

Yes, you can make an application for a DRO on Universal Credit if you satisfy all the criteria for eligibility. Your entitlement to Universal Credit will not automatically exclude you from making a successful application, since many people who receive benefits apply for and get DROs annually.

The application will be considered with regard to your financial situation in terms of income, debt, assets, and disposable income.

If you want to make an application for a DRO on Universal Credit, then there is a number of criteria you need to meet in order to be eligible under the existing requirements. Among these is having the total amount of debts which is within the maximum limit of qualifying debt, assets that don’t have more value than the allowed one, and a very small amount of disposable income. 

Also, you cannot have a car that exceeds the permitted limit unless it is exempted because of a disability, etc.

While evaluating your application for a DRO on Universal Credit, this benefit will be considered as your source of income along with all your salary, pension, or other payments you get. 

At the same time, getting Universal Credit does not necessarily mean that you have too high an income to be eligible for such relief. The thing that is important is how much money you have left after deducting your reasonable living expenses.

If your disposable income is below the required limit and you meet other conditions, then you can apply for a DRO on Universal Credit and gain protection from qualifying creditors for the next year.

As the regulations and the amount of finances are likely to be modified, it would be better to consult with an approved debt adviser before applying for a DRO.

Benefits of Applying for a DRO on Universal Credit

There are many benefits of A DRO on Universal Credit for people with low incomes who are struggling to manage their debts. Below are some of the key advantages.

Qualifying Debts Are Frozen

Once your DRO on Universal Credit is approved, creditors included in the order must stop requesting payments on the qualifying debts. In most cases, they also cannot add further interest or charges, preventing your debt from continuing to grow during the 12-month moratorium period.

Protection from Creditor Action

A Debt Relief Order provides legal protection against creditors for the debts covered by the order. This generally means creditors cannot take court action, pursue debt collection, or contact you demanding payment while the DRO is in effect, giving you valuable peace of mind.

Financial Relief for People on Low Incomes

A DRO on Universal Credit is designed to help people that are having problems due to not having much money, assets or income once all of their essential costs have been covered. They will no longer be burdened by making payments that they cannot afford and can work towards a new start.

Eligible Debts Can Be Written Off

If your financial circumstances do not significantly improve during the 12-month moratorium period, the qualifying debts included in your DRO on Universal Credit are usually written off at the end of the order if you meet the requirements.

A 12-Month Moratorium Period

A Debt Relief Order lasts for 12 months. During this time, you must comply with the conditions of the order and report any significant changes to your financial circumstances. If you continue to meet the requirements throughout the moratorium period, your qualifying debts will generally be discharged once the DRO comes to an end.

What Debts Does a DRO on Universal Credit Cover?

A DRO on Universal Credit can include many of the most common types of unsecured debt. Qualifying debts generally include:

• Credit card debt
• Personal loans
• Bank overdrafts
• Store cards
• Payday loans
• Council tax arrears
• Utility bill arrears, including gas, electricity, and water
• Rent arrears
• Benefit overpayments in certain circumstances
• Money owed under hire purchase or conditional sale agreements (where applicable)

Including these debts in a DRO on Universal Credit means they are covered by the protections of the order, preventing creditors from taking further action while the DRO is in force.

However, not every type of debt can be included. Certain financial obligations remain payable even if you have a Debt Relief Order. These generally include:

• Student loans
• Child maintenance or child support payments
• Court fines
• Confiscation orders
• Social Fund loans
• Criminal compensation orders
• Debts arising from fraudulent activity

Understanding what a DRO on Universal Credit can and cannot cover is essential before applying. While a Debt Relief Order can significantly reduce the burden of qualifying unsecured debts, you will still be responsible for paying any excluded debts. 

An approved debt adviser can review your individual circumstances, explain which debts are eligible, and help you determine whether a DRO is the most suitable solution for your financial situation.

How to Apply for a DRO on Universal Credit

If you believe you qualify for a DRO on Universal Credit, you cannot submit an application on your own. Instead, applications must be made through an approved debt adviser, also known as an approved intermediary. They will assess your financial circumstances, determine whether you meet the eligibility criteria, and submit the application on your behalf.

Step 1: Speak to an Approved Debt Adviser

The first step is to contact an approved debt adviser. During your consultation, they will review your income, debts, assets, and monthly expenses to determine whether a DRO on Universal Credit is the most appropriate debt solution for your situation.

Step 2: Gather the Required Information

Before your application can be submitted, you’ll need to provide accurate financial information. This typically includes:

• Proof of identity
• Details of your Universal Credit payments and any other income
• A list of all outstanding debts and creditors
• Recent bank statements
• Information about any savings, investments, or other assets
• Details of any vehicle you own
• Evidence of your monthly household expenses

Providing complete and accurate information helps ensure your application is processed as smoothly as possible.

Step 3: Submit Your Application

After your advisor verifies that you qualify, they will complete and submit the application for DRO on Universal Credit online. Your advisor will also inform you of your responsibilities during the 12 months of the moratorium period.

Step 4: Await the Decision

Once the application process has been completed, the Official Receiver will consider it. Provided that there are no problems and you satisfy all the necessary requirements, then your DRO will be approved and the protection offered by the order will become effective.

How Long Does the Process Take?

The total duration may vary based on the speed at which the information is provided by you and whether or not more information is required. After the submission of a complete application, the decision is usually reached within a couple of days, although there might be some instances where it takes more time.

When a DRO on Universal Credit May Not Be the Best Option

DRO on UC would be a wrong choice if you owe money that exceeds the qualifying limit, have possessions that exceed the value of the limit allowed, have disposable income, and also when there is an expectation that your financial status will improve in the coming days. 

You should consider seeking advice from an approved debt advisor who will look into your case and come up with the right option for you.

Final Thoughts

A DRO on Universal Credit may serve as an effective way of dealing with your debt problems if you have a low income, few assets, and certain types of unsecured debts. Just like with other applications for a DRO, the fact of receiving Universal Credit doesn’t mean that you are eligible, but at the same time, there’s no restriction that would prevent you from applying.

Provided that you meet all the necessary requirements, such as having a low income, few assets, a set of qualifying debts, and a negative disposable income, a Debt Relief Order may be a good way of protecting yourself from creditors and writing off your qualifying debts within 12 months.

But before applying, it’s crucial to learn what debts may be included into a DRO, what responsibilities will be put on you in case of a DRO application, and whether another solution of your problem would be more suitable in your case.

If you want to make an informed decision, the best thing to do is to consult an approved debt adviser.

Key Points

• A Debt Relief Order (DRO) is a formal debt solution designed for people with low incomes, limited assets, and qualifying unsecured debts.
• Receiving Universal Credit does not automatically prevent you from applying for a DRO on Universal Credit.
• Eligibility for a DRO on Universal Credit depends on factors such as your income, debts, assets, disposable income, and whether you meet the current qualifying limits.
• Universal Credit is treated as part of your income when your financial circumstances are assessed, but eligibility is based on your overall financial position.
• Once approved, a DRO on Universal Credit freezes qualifying debts and generally stops creditors from taking enforcement action or adding further interest and charges.
• If your financial circumstances remain unchanged during the 12-month moratorium period, your qualifying debts are typically written off at the end of the Debt Relief Order.
• A DRO on Universal Credit can cover many unsecured debts, including credit cards, personal loans, overdrafts, council tax arrears, rent arrears, and utility bill arrears, but excludes debts such as student loans, child maintenance, and court fines.
• You cannot apply for a Debt Relief Order by yourself; applications have to go through an approved debt adviser who will check whether you are eligible for it and fill out the application form for you.
• The procedure of making an application for a DRO on Universal Credit includes collecting financial information, filing the application form through an approved agent, and having the order approved by the Official Receiver.
• In cases where the DRO on Universal Credit does not seem to work, there are other debt management options that can be considered including Debt Management Plans (DMPs), IVAs, bankruptcy, and arrangements with creditors.

FAQs

Can I have other benefits along with Universal Credit and also qualify for a DRO?

Yes. Receiving other benefits alongside Universal Credit, such as Personal Independence Payment (PIP), Employment and Support Allowance (ESA), or Carer's Allowance, does not automatically prevent you from qualifying for a Debt Relief Order. Your eligibility is based on your overall financial circumstances, including your debts, assets, and disposable income, rather than the specific benefits you receive.

How will my employer know if I have a DRO?

No. Your employer will not usually be informed if you have a Debt Relief Order. However, certain professions, particularly those in financial services, law, or roles with regulatory requirements, may require you to disclose your DRO. It is important to check your employment contract or professional body's rules if you are unsure about your obligations.

Is there any way to raise my credit score following a DRO?

Yes. Although a Debt Relief Order will affect your credit record for six years, you can gradually rebuild your credit score after it ends. Paying bills on time, managing your finances responsibly, registering on the electoral roll, and only using credit that you can comfortably repay can help improve your creditworthiness over time.

Can I move house while I have a DRO?

Yes. You can move home while your Debt Relief Order is active. However, if your move significantly changes your financial situation, such as increasing your rent or affecting your disposable income, you should notify your debt adviser or the Official Receiver. Keeping your financial information up to date helps ensure your DRO continues to meet the eligibility requirements.