Guidance

Debt relief restrictions orders and undertakings

Updated 4 April 2017

1. Overview

If you have a debt relief order (DRO) and the official receiver thinks you have been dishonest or are to blame for your debts, the court can make a debt relief restrictions order (DRRO) against you.

Your DRO already places restrictions on what you can do for a set period. A DRRO extends this period of restrictions for between 2 and 15 years and subjects you to further restrictions.

2. Why you might get a DRRO

Examples of behaviour that can lead to a DRRO include:

• giving away assets or selling them for less than their value
• paying some creditors in preference to others
• borrowing money that you know you can’t repay
• neglecting your business so that your debts increase
• not cooperating with the official receiver
• behaving fraudulently eg giving false details to obtain credit

This is not a complete list. Any dishonest or blameworthy behaviour could lead to a DRRO. The court may consider conduct that occurred before or after your debt relief order.

Being bankrupt in the past six years is also a matter of conduct to be considered but is not, in itself, sufficient reason to apply for a DRRO.

The fact that you have done one of these things doesn’t mean that you will be automatically subject to a DRRO, but it does mean that the official receiver needs to look at the conduct and decide whether the public needs protection.

3. How you will hear about a DRRO

The official receiver must apply to court for a DRRO within the DRO period, unless they have permission from the court to apply later. This is usually 12 months, when the people you owe money to (‘creditors’) can’t take action against you.

They will write to tell you if they plan to apply for a DRRO and why, unless less than 6 weeks remain to the end of the DRO period.

4. How to respond

You have 21 days to reply to this letter about your behaviour.

If you accept the allegations against you, you can offer to enter into a debt relief restriction undertaking (DRRU). A DRRU has the same legal effect as a DRRO but you don’t need to go to court. As you accept the allegations made against you, the period of the DRRU may be shorter than if the court made a DRRO. If you have any comments to explain your conduct, you can tell the official receiver, as this may further reduce the period.

If you don’t reply to the official receiver within 21 days, or there are less than 6 weeks until the end of your DRO period, they will schedule a court hearing to consider your case. You will be sent details of the case and the date of your hearing. You will be asked to confirm receipt and what you intend to do on a form that you should return to the court within 14 days. If you do not do this then you can still attend the hearing but may not take part without the court’s permission.

If you want to challenge the allegations against you, you have 28 days from when you receive notice of the hearing to give your evidence to the court. The official receiver may provide further evidence in response to this. The court will take all of the evidence into account.

You can still suggest a DRRU at this time or any time up to the hearing. If a DRRU is accepted before the date of the hearing then the official receiver will make an application to court to ask that the hearing be vacated (cancelled). The official receiver will tell you when they have done this.

At the hearing, the court will consider your case, even if you are not there, and decide whether a DRRO is appropriate.

5. What happens after a DRRO or a DRRU is made

You will be sent a copy of the DRRO or DRRU.

Once a DRRO or DRRU has been made, your creditors will be told.

Also, the details of your DRRO or DRRU:

• will be listed on the Individual Insolvency Register
• further information about the DRRO/DRRU will be displayed on the Bankruptcy Restrictions Search Facility for 3 months – after this time the public may still request details of the misconduct
• may appear in a press release.

6. DRRO and DRRU restrictions

DRRO and DRRU restrictions include the rules you have to keep to when you have a DRO and other extra rules. For example you must not:

• act as a director of a company, or form, manage or promote a company, without permission from the court
• carry on business under a different name without telling people you do business with the name (or trading style) in which the DRO was made
• try to borrow more than £500 without saying that you are subject to restrictions
• be a trustee of a charity
• work in various posts in education such as being a school governor

There are many other restrictions; a more detailed list of restrictions can be found in the document Additional effects of a bankruptcy restrictions order or undertaking (the same restrictions usually apply to people subject to DRROs as to those subject to bankruptcy restrictions).

To check whether a DRRO/DRRU stops you being elected to, or remaining in, a particular office or position, you should read our list and also seek guidance from the appointing or authorising body. In some cases you may be able to carry out these roles with permission from the relevant authority.

The Insolvency Service’s Enquiry Line may also be able to check, but if you are uncertain, get legal advice.

Insolvency Service helpline

Contact form http://www.insolvencyd...

Insolvency Service helpline 0300 678 0015

Please only attend our offices if you have an appointment.

For information about the insolvency process contact the Insolvency Service helpline. The helpline is open 9am to 5pm Monday to Thursday, and 9am to 3pm on Friday.

We can give you information about processes administered or regulated by the Insolvency Service. This includes bankruptcy, debt relief orders and company liquidations.

We cannot give you: legal or financial advice, information on specific insolvency cases, information or advice about other government departments or information about redundancy payments.

If you are contacting about an existing bankruptcy or compulsory company liquidation case, use our ‘contact an official receiver’ guidance.

In addition many organisations and professions may apply their own rules and you should contact them to find out if you are affected by them, and, if necessary, seek your own legal advice.

7. What happens if you break the restrictions

If you break the restrictions you can be prosecuted and a further DRRO application may be made.

If you take part in a company’s management without the court’s permission, you will be personally responsible for the debts that arise while you’re managing it.

If you ask another person to do something that enables you to act in contravention of the restrictions, that person may also be prosecuted and in relation to a company be liable for the debts that arise while you are managing it.

8. What happens if your DRO period ends before your hearing

If your DRO period comes to an end or the DRO is revoked (cancelled) before the DRRO application is heard by the court, you may be given an interim DRRO. An interim DRRO imposes DRRO restrictions on you until the court makes a decision about your case.

9. What happens if your DRO is revoked (cancelled)

Your DRRO or DRRU remains valid even if your DRO is revoked (eg because it shouldn’t have been made or your circumstances have changed) unless the court tells you otherwise.

The official receiver can also still apply for a DRRO and accept a DRRU after a DRO has been revoked.

10. How to complain about an individual who is breaching the terms of a DRRO/DRRU

For details of how to complain about an individual who is breaching the terms of a DRRO/DRRU visit how to complain about someone who is bankrupt.