Insolvency Service Review Confirms DRO Reforms Widened Debt Relief

What Happened

The Insolvency Service has published a review of Debt Relief Order (DRO) reforms made in 2021 and 2024. Its conclusion is straightforward: both changes worked. More people with unmanageable debt got access to a formal route out of it, and the government's own testing found no sign of people abusing the system to qualify.

A DRO is a form of debt relief for people with relatively low debt, few assets and little spare income. Debts are frozen for 12 months. If the person's situation hasn't improved by then, the debts are written off.

What Changed

Two things changed the eligibility rules, and one change removed a cost. In June 2021, the debt limit rose from £20,000 to £30,000, and the maximum vehicle value rose from £1,000 to £2,000. In June 2024, the debt limit rose again, to £50,000, and the vehicle limit doubled to £4,000. Separately, in April 2024, the £90 application fee was scrapped entirely.

Which Change Mattered Most

Raising the debt limit did most of the work. In the year after the 2021 change, 51% of newly eligible DROs were down to the higher debt limit alone, more than any other factor. Widening the vehicle allowance accounted for just 11%. In 2024, the pattern repeated: 68% of newly eligible cases came from the higher debt limit alone, against 26% for the bigger vehicle allowance.

The bigger surprise is what happened when the fee disappeared. Removing £90 from the process increased DRO volumes by 78%, more than double the effect of either eligibility change. A small administrative cost, it turns out, was a bigger barrier than the eligibility rules themselves.

Did Anyone Game the System?

This is the question any reform like this invites: does making it easier to qualify mean people just manipulate their finances to sneak in? The Insolvency Service checked. It looked at whether debt, asset and income levels clustered suspiciously close to the new limits, which is what you'd expect to see if people were gaming the rules. It found no such pattern, in 2021 or 2024.

Enforcement data backs this up. Where someone is found to have lied or hidden information in a DRO application, the Insolvency Service can extend restrictions on them for 2 to 15 years. Between June 2021 and November 2025, only 11 of these were issued. That's under 1% of all DROs granted in that period.

People Switched From Bankruptcy to DROs

One knock-on effect the review measured directly: the 2021 change caused a 32% drop in bankruptcy applications among people who would also have qualified for a DRO. In plain terms, a third of the people who might once have gone through bankruptcy, a slower, costlier process, chose the DRO route instead once they became eligible for it. The 2024 change didn't repeat this effect at a statistically significant level, but the direction was the same.

Who Actually Uses a DRO

DRO use varies sharply by where people live. The North East has consistently had the UK's highest rate, more than double London's throughout the period studied.

Rates per 10,000 people, 2024. Women are also almost twice as likely as men to enter a DRO, and use is highest among people aged 35 to 44 and lowest among the over-65s.

Is the Cost Worth It?

Widening access isn't free. Someone has to bear the cost of the debt that gets written off, and the review puts most of that on creditors, debt advice organisations and insolvency practitioners, not the government. Over a five-year period, the 2021 changes are estimated to have cost businesses around £34.5 million in total.

Against that, the review argues the reform is still worth it. Problem debt has a well-documented effect on people's wellbeing, and the review's own breakeven analysis found that as few as 246 extra DROs a year, roughly 2% of the total, would be enough for the wellbeing benefit alone to outweigh the financial cost. Given the actual numbers are far higher than that, the review treats the case as settled.

What Happens After a DRO Ends

If a DRO holder's circumstances haven't improved after the 12-month moratorium, the included debts are written off completely. Long-term outcome data is limited, but one debt charity found that 91% of its DRO clients were still debt free a year after completing the process. Separate research commissioned by the Insolvency Service, based on interviews with people who'd been through a DRO, found most reported real financial relief and knock-on improvements to their health and family life.

How to Apply

A DRO can't be applied for directly. It has to go through a free debt adviser, such as StepChange, Citizens Advice or National Debtline, who checks eligibility and submits the application. Since April 2024, there's no fee for the DRO application itself, and legitimate debt advice in the UK is always free.

DRO, IVA or Bankruptcy

A DRO tends to suit people with lower debt, few assets and little spare income. An IVA suits people with higher debt who have enough spare income to make monthly payments over several years. Bankruptcy remains an option for people outside DRO's debt and asset limits. Kael Tripton's comparison of IVA and bankruptcy in the UK covers cost, duration and credit-file impact for both in more depth.

Frequently asked questions

What did the Insolvency Service review actually confirm?

That three recent reforms, the 2021 and 2024 eligibility widenings and the 2024 removal of the £90 fee, all increased the number of people accessing a DRO, with no evidence of people manipulating their finances to qualify.

What are the current eligibility criteria for a DRO?

Debts of £50,000 or less, assets of £2,000 or less (plus a vehicle worth up to £4,000), and surplus income of £75 or less a month, with no application fee.

Which change had the biggest effect on DRO numbers?

Removing the £90 application fee, which increased DRO volumes by 78%, more than either eligibility widening (27% in 2021, 9% in 2024).

Does easier access to DROs mean more people abuse the system?

The review specifically tested for this and found no evidence of it. Enforcement action for dishonesty affected under 1% of DROs granted since 2021.

Is a DRO better than bankruptcy or an IVA?

It depends on individual circumstances. A DRO suits lower debt and little spare income, an IVA suits higher debt with spare income for repayments, and bankruptcy applies outside DRO's limits. A free debt adviser can assess which applies.