Debt Relief Restrictions Orders/Undertaking
What is a debt relief restrictions order?
If a person is subject to a debt relief order and the official receiver considers that they have acted dishonestly or are blameworthy in some other way, the official receiver will report the facts to court and ask it to make another order. This is called a debt relief restrictions order or DRRO. The court will consider the official receiver’s report and any other evidence, and will decide whether it should make a DRRO. If it does, the person will be subject to certain restrictions for the period stated in the DRRO. This will be between 2 and 15 years.
What are the DRRO restrictions?
The restrictions against a person are wide ranging. They include those set out in insolvency law, which the individual is subject to when the debt relief order is made. The restrictions are normally lifted when the moratorium period ends, which is usually 12 months after the debt relief order is made. However, if a DRRO is made, then the restrictions against the person will continue for up to 15 years. These restrictions include the following:
- If the person wishes to get credit of £500 or more (either alone or jointly with another person, such as a partner or spouse), they must first tell the credit provider that they are subject to debt relief restrictions.
- Obtaining credit would include, for example:
- entering into a hire purchase agreement;
- ordering goods and failing to pay for them when they are delivered;
- and borrowing money.
- If the person carries on business in a different name from the name in which the debt relief order was made, they must tell those that they wish to do business with the name (or trading style) under which the debt relief order was made.
- The person may not act as the director of a company or take part in its promotion, formation or management unless the court grants them permission to do so.
- The person may not act as an insolvency practitioner, or as the receiver or manager of a company on behalf of debenture holders.
Failure to comply with any of the restrictions above would be a criminal offence.
Full details of the principal restrictions imposed by Debt Relief Restrictions Orders and Debt Relief Restrictions Undertakings can be found here (DOC, 86 Kb) .
What happens if a person is subject to a DRRO and breaks the restrictions?
The person may be prosecuted and, if found guilty, get a criminal penalty such as a fine or imprisonment. Also, if the person takes part in the management of a company without the court’s permission, they will be personally responsible for any of its debts that arise while they are managing it.
The person may be prosecuted and, if found guilty, get a criminal penalty such as a fine or imprisonment. Also, if the person takes part in the management of a company without the court’s permission, they will be personally responsible for any of its debts that arise while they are managing it.
When can the official receiver apply for a DRRO?
The official receiver must apply to court for a DRRO within the moratorium period of the debt relief order, although they can ask the court for permission to apply later. If the official receiver thinks it right to do so, they can apply to the court for an interim DRRO, i.e. before the court hears the DRRO application. If granted, the restrictions will apply to the person from the date of the interim order until the court considers the application for a DRRO. The court will grant an interim DRRO if the DRRO application is likely to succeed and it is in the public interest to make an interim DRRO. An interim DRRO has the same effect as a DRRO.
What sort of conduct could lead the official receiver to apply for a DRRO?
When deciding whether to make a DRRO, the court may take into account a person’s conduct before and after the date of the debt relief order, so the official receiver will look closely at all conduct.Below are some examples of dishonest or blameworthy conduct (“unfit conduct”) that the official receiver could use as evidence in their report to court. This is not a complete list, but includes:
- incurring debts that a person knew they had no reasonable chance of repaying;giving away assets or selling them at less than their value;
- deliberately paying off some creditors in preference to others;gambling or making rash speculations or being unreasonably extravagant;
- failing to keep or produce records that would explain a loss of money or property;
- fraud, or fraudulent breach of trust;
- failing to co-operate with the official receiver;
- causing debts to increase by neglecting business affairs;
- failing to supply goods or services that have been paid for;
- carrying on a business when the person knew or ought to have known that they could not pay their debts.
The more blameworthy the conduct, in the court’s opinion, the longer the DRRO is likely to last.
How will the person know if the official receiver intends to apply for a DRRO against them?
Notice of intention to apply for a DRRO the official receiver will write to inform the person that they intend to apply to the court for a DRRO but have not yet done so, if:
- they have finalised their report to court in support of an intended application for a DRRO;and
- more than 6 weeks remain until the moratorium period of the debt relief order ends.
They will send a copy of the report and allow the person 21 days to respond to the allegations outlined in it. If less than 6 weeks remain until the moratorium period of the debt relief order ends, the official receiver may apply to the court for a DRRO without notifying the person in advance that they intend to apply. In that situation, please see “What are the options after the official receiver has made a DRRO application to the court?” for more information.
What should a person do on receiving a notice of intention to apply for a DRRO from the official receiver?
a) If a person accepts the official receiver’s allegations about their unfit conduct, they may offer to enter into a debt relief restrictions undertaking (DRRU). An undertaking is an agreement to do something, or not to do something. A DRRU has exactly the same effect as a DRRO, but if a person enters into a DRRU they will not have to attend a court hearing. Because they do not dispute the unfit conduct, the period of the restrictions is likely to be shorter than if the court made a DRRO. The person will be able to put their comments to the official receiver. Doing so may further reduce the period if the official receiver decides this would be reasonable. However, if an undertaking cannot be agreed, the official receiver will apply to court for a DRRO as set out in b) below.
b) If a person does not accept the official receiver’s allegations about their conduct, or does not respond within 21 days to the letter of intention to apply for a DRRO, the official receiver will apply to court for a DRRO at least one day before the expiry of the moratorium period. They will send a letter saying they have done so. The person will receive this letter at least 6 weeks before the court hearing date. The letter will include copies of the application to court, the report, and supporting evidence giving details of the alleged unfit conduct. It will also contain the hearing date and how long the official receiver suggests the DRRO should last. The person is asked to acknowledge receipt of the documents on a form that should be returned to the court within 14 days.
What are the options after the official receiver has made a DRRO application to the court?
What a person should do will depend on whether they accept the allegations against them in the official receiver’s report or whether they wish to challenge them.
a) If they accept the official receiver’s allegations, they can still offer to enter into a DRRU.
b) If they wish to challenge (defend) the official receiver’s allegations, they have 28 days from receiving notice of the proceedings to file (send or hand in) their evidence in court. If they file evidence, the official receiver may file further evidence to support their application. The court will take all the evidence into account. The person may also attend the hearing and take part in the proceedings.If the person files evidence in court but later changes their mind about defending the proceedings, they may still offer to enter into a DRRU at any time before the hearing.
c) If they do nothing, or simply ignore the proceedings and do not attend the hearing, the court may still make a DRRO if, after considering the conduct as reported by the official receiver, it thinks this would be appropriate.
What happens after a DRRO is made or a person enters into a DRRU?
When a DRRO is made or a person enters into a DRRU, the restrictions (including, but not limited to, those referred to above) apply immediately. Details of the person’s name, address etc. will go into a public register and stay there until the order or undertaking ends. Details of the conduct relating to DRROs and DRRUs usually remain on our website for 6 months. In some cases the DRRO or DRRU may be reported in a press release that will identify the person, describe the conduct that the court has found or the conduct detailed in the DRRU, and state the period of restrictions.
What if the debt relief order is revoked?
If a debt relief order is revoked (wiped from the record) because it ought not to have been made, circumstances have changed or the person has not co-operated with the official receiver, then any DRRO or DRRU that applies will still be valid, unless the court informs the person otherwise. If the debt relief order is revoked, the court may still decide that any application for a DRRO that started before it was revoked. The official receiver can still accept a DRRU that was offered before the debt relief order was revoked. The official receiver may also apply for a DRRO and accept a DRRU after the debt relief order is revoked.
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 click here.
Further enquiries about DRROs/DRRUs
If you still have unanswered questions about DRROs/DRRUs you can contact The Insolvency Enquiry Line on 0845 602 9848 – between 8.00am and 5.00pm Monday – Friday except bank holidays; or email:insolvency.enquiryline@insolvency.gsi.gov.uk
