DRO vs bankruptcy — which is right for you?

Both a Debt Relief Order (DRO) and bankruptcy write off unaffordable debts in England & Wales, but they are designed for very different situations. Choosing the wrong one can be costly — a DRO can be revoked if your circumstances change, and bankruptcy can put your home at risk. This guide compares them honestly so you can decide which fits.

The quick comparison

| | DRO | Bankruptcy | |---|---|---| | Debt level | Up to £30,000 | No upper limit | | Cost | £90 (one-off) | £680 (£550 + £130) | | Assets | £2,000 or less; vehicle up to £2,000 | Reviewed; household goods and tools protected | | Surplus income | Under £75/month | May trigger an Income Payments Agreement (IPA) | | Homeownership | Not allowed | Allowed, but equity may be released | | Duration | 12-month moratorium, then write-off | Usually 12 months to discharge | | Credit file | 6 years | 6 years | | Directorship | Allowed | Not allowed during bankruptcy |

When a DRO is the right fit

A DRO is built for people with modest debts, very low income, and nothing to lose. It suits you if:

• You owe £30,000 or less in qualifying (unsecured) debts.
• You have assets worth £2,000 or less (a vehicle up to £2,000 is allowed).
• Your surplus income is under £75 a month after essential bills.
• You do not own a home.
• You have not had a DRO in the last six years.

The big advantages of a DRO: it costs only £90, you keep your limited assets, and there is no Official Receiver interview. The moratorium freezes your debts and most creditor action for 12 months; after that the debts are written off if your situation has not improved.

The downside: if your income rises or you come into assets during the moratorium, the DRO can be revoked and you are back where you started. See What is a Debt Relief Order (DRO)? for full eligibility.

When bankruptcy is the right fit

Bankruptcy handles larger debts and more complex situations. It suits you if:

• You owe more than £30,000 (no upper limit).
• You have little or no home equity to lose.
• You have unstable or low income but debts too large for a DRO.
• Your debts include some that a DRO cannot cover.

Bankruptcy is more expensive (£680) and more public (your name appears on the Individual Insolvency Register). But it clears a much wider range of debts and there is no asset cap — the Official Receiver reviews what you own and protects reasonable household goods and tools of trade. If you have meaningful home equity, the OR may need to release it, which can mean selling your home. See What is bankruptcy? and What happens to your home in bankruptcy?.

What each one writes off

Both write off most unsecured debts: credit cards, personal loans, overdrafts, utility arrears, council tax arrears for past years, and benefit overpayments.

Neither writes off:

• Student loans (in most circumstances)
• Court fines and magistrates' fines
• Child maintenance arrears
• Debts from fraud

What about your home?

This is often the deciding factor:

• DRO: you cannot have a DRO if you own a home. If you own property — even with negative equity — bankruptcy or an IVA is your route instead.
• Bankruptcy: if you have equity in your home, the Official Receiver must realise it for creditors. If there is little or no equity, you may be able to keep the home, but the OR has an interest in it for three years. Take advice before filing if you own property.

What about your income?

• DRO: your surplus must be under £75/month. If it is higher, you do not qualify and may need bankruptcy or an IVA.
• Bankruptcy: if you have surplus income above roughly £20/month, the OR may set up an Income Payments Agreement (IPA) lasting up to three years. This means you pay a monthly sum even after discharge. See What is an IPA?.

The cost difference matters

• A DRO costs £90 — and can be paid in instalments before it is granted.
• Bankruptcy costs £680 — also payable in instalments, with fee waivers for some on qualifying benefits. See Bankruptcy fee waiver and paying in instalments.

If £90 is achievable but £680 is not, and you meet DRO criteria, the DRO is usually the better route.

How long each takes

• DRO: 12 months from the date it is granted. After that, your debts are written off if your situation has not improved.
• Bankruptcy: usually 12 months to discharge, but an IPA can extend payments for up to three years, and the OR's interest in your home lasts three years.

Can you choose both?

No. You can only be in one formal insolvency at a time. If a DRO is refused because your debts are too high or your surplus too great, bankruptcy is usually the next option. If you start a DRO and your circumstances change, you may need to switch to bankruptcy — speak to an approved intermediary immediately.

A quick rule of thumb

• Low debt (under £30k), low income, no home, few assets → a DRO is almost always right.
• Higher debt, no home equity, low income → bankruptcy is usually right.
• Higher debt, home to protect, stable income → consider an IVA instead. See IVA vs bankruptcy.

Frequently asked questions

Is a DRO cheaper than bankruptcy? Yes. A DRO costs a one-off £90 fee, while bankruptcy costs £680. Both can be paid in instalments, but the DRO fee is much lower and there is no fee-charging intermediary to use.

Does a DRO affect my home? You cannot get a DRO if you own a home. If you own property — even with no equity — bankruptcy or an IVA is your route instead.

Which writes off more debt? Bankruptcy handles any amount of qualifying debt; a DRO only covers up to £30,000. Both write off the same types of unsecured debts.

Can I keep my car with a DRO or bankruptcy? With a DRO you can keep a vehicle worth up to £2,000. In bankruptcy you can keep a vehicle if it is needed for work and is of modest value; a more valuable car may be sold and a cheaper one provided.

Which is faster? Both take about 12 months to reach write-off (DRO moratorium / bankruptcy discharge), but bankruptcy can include an Income Payments Agreement lasting up to three years.

Get advice before you choose

Both are formal, legally binding routes and the wrong choice can cost you your home or years of payments. Always speak to a free debt charity — StepChange (0800 138 1111), National Debtline (0800 808 4000), or Citizens Advice (0800 144 8848) — or an approved intermediary before deciding. Use Debtrupt's Options assessment to compare all four routes (bankruptcy, DRO, IVA, DMP) against your own numbers.

England & Wales only. General information, not legal advice.