Last updated: 4 November 2026. General information for England and Wales, not regulated debt advice.
If your debts have got to the point where you can’t see a way to pay them back, you may have heard of things like a Debt Relief Order, an IVA or bankruptcy. They can sound frightening, and the adverts promising to “write off your debt” don’t help.
These formal options exist for a reason: they give people a fresh start when debts genuinely can’t be repaid. But each one has rules, costs and consequences. This guide compares them side by side, in plain English, so you know what to ask when you speak to a free debt adviser.
It’s part of my debt and credit UK guide.
Please get free advice before choosing any of these. National Debtline (0808 808 4000) and StepChange (0800 138 1111) will look at your situation and explain every option at no cost. Seefree debt advice UK.
The options at a glance
| Debt management plan (DMP) | Debt Relief Order (DRO) | Individual Voluntary Arrangement (IVA) | Bankruptcy | |
|---|---|---|---|---|
| What it is | An informal plan to pay creditors less each month | Most debts written off after 12 months if you have very little income and assets | A legal agreement to repay part of your debts over a set time | A legal process where your assets may be used to pay creditors and most remaining debts are written off |
| Who it suits | People who can repay, but not at the current rate | Low income, few assets, no home to own | Regular income, larger debts, often homeowners | People who can’t repay and don’t qualify for a DRO |
| Cost | Free from debt charities | No fee | Set-up and handling fees, usually taken from your payments | £680 to apply |
| How long | Until debts are repaid | 12 months | Set by the insolvency practitioner, often several years | Usually around 12 months, though some payments can continue longer |
| Legally binding? | No | Yes | Yes, once 75% of creditors (by value) agree | Yes |
| Your home | Not directly affected | You can’t own your home | Usually kept, but you may need to release equity | Your home may be sold, or your share used to pay creditors |
| Credit file | Shows on your file (accounts may default) | 6 years | 6 years | 6 years |
Figures from GOV.UK, checked November 2026.
Debt management plan (DMP)
A DMP is an informal agreement to pay your non-priority creditors a lower monthly amount you can afford. A debt charity like StepChange can set one up for free and pay your creditors for you.
Good to know: – It’s not legally binding, so creditors don’t have to agree or freeze interest, although many do – You still repay the full debt, just more slowly – Your accounts may show as defaulted or in an arrangement, which affects your credit file – You can end it at any time
Best for: people with a steady income who could repay their debts in a reasonable time if payments were lower.
Debt Relief Order (DRO)
A DRO is for people with low income and few assets. You make no payments towards the debts included for 12 months, and at the end most of them are written off.
You’re generally eligible if (GOV.UK, November 2026): – You owe less than £50,000 – Your spare income is under £75 a month after essential costs – Your assets are worth less than £2,000 and you don’t own your home – You don’t own a vehicle worth £4,000 or more – You’ve lived or worked in England or Wales in the last 3 years – You haven’t had a DRO in the last 6 years
Good to know: – There’s no fee – You can only apply through an approved debt adviser. Free services can do this for you – It lasts 12 months. Restrictions apply during that time, such as limits on borrowing more than £500 without telling the lender – It can be cancelled if your circumstances improve, for example if you inherit money – Some debts can’t be included, such as student loans, court fines and child maintenance
Best for: people on low incomes, often renting, with few assets and no realistic way to repay.
Individual Voluntary Arrangement (IVA)
An IVA is a legal agreement with your creditors to pay back part of what you owe, usually through monthly payments over a set number of years. It’s set up by a licensed insolvency practitioner.
Good to know: – It starts if creditors holding 75% of your debts (by value) agree, and then applies to all of them – Creditors can’t take action against you for the included debts while it runs – There are fees: usually a set-up fee and a handling fee for each payment, which come out of what you pay – It’s added to the public Individual Insolvency Register and removed three months after it ends – If you miss payments, it can fail, and the practitioner could make you bankrupt – Homeowners may be asked to release equity towards the end
Best for: people with a regular income and larger debts who want to protect their home and can commit to payments for several years.
Be careful: IVAs are heavily advertised. Some firms push them when a DMP, DRO or bankruptcy would suit you better. A free adviser can tell you if an IVA is right for you.
Bankruptcy
Bankruptcy is a legal process for people who can’t repay their debts. Your assets may be sold to pay creditors, and most remaining debts are written off when the bankruptcy ends.
Good to know: – It costs £680 to apply online (GOV.UK). Some charities can help with the fee – It usually ends after 12 months, but you may have to make payments from your income for up to three years if you can afford them – Your home may be sold, or your share of it used to pay creditors – Some jobs and roles have restrictions for people who are bankrupt – Your name goes on the Individual Insolvency Register, and an entry may be made on the Land Charges register – Some debts aren’t written off, such as student loans, court fines and child maintenance
Best for: people who can’t repay, don’t qualify for a DRO, and for whom the effects on their home and job are manageable.
How each option affects your credit file
All of these will affect your credit score. DROs, IVAs and bankruptcy stay on your credit file for six years. A DMP doesn’t appear as a “solution” in the same way, but the accounts in it may be recorded as defaulted or in an arrangement, which also usually lasts six years.
The upside: once you’re through it, you can start rebuilding. My guide on how to improve your credit score explains how.
Other options to know about
- Breathing Space (England and Wales): up to 60 days’ protection from most creditor action while you get advice, with most interest and charges frozen
- Administration order: for people with a County Court or High Court judgment and total debts under £5,000
- Full and final settlement: offering a lump sum to clear a debt for less than you owe
- Scotland has different options: the Debt Arrangement Scheme, Protected Trust Deeds, the Minimal Asset Process and Sequestration
Questions to ask a debt adviser
- Which options am I eligible for?
- What would each one cost me in total?
- What happens to my home and car?
- Will it affect my job?
- Which debts would be included, and which wouldn’t?
- What happens if my income changes?
DRO vs IVA vs bankruptcy: people also ask
What is the difference between a DRO and bankruptcy?
A DRO is for people with debts under £50,000, spare income under £75 a month and assets under £2,000, who don’t own a home. It’s free and lasts 12 months. Bankruptcy has no debt limit, costs £680 and can mean your home or assets are sold.
Is an IVA better than bankruptcy?
It depends. An IVA can help you keep your home and avoid some bankruptcy restrictions, but it involves years of payments and fees and can fail if you miss them. Bankruptcy is quicker but can affect your home and job. A free adviser can help you weigh it up.
How much does a DRO cost?
Nothing. The DRO fee was abolished in April 2024. You apply through an approved debt adviser, many of whom are free.
Can I keep my house in an IVA?
Usually, yes, but you may be asked to release equity from your home towards the end of the IVA. Ask the insolvency practitioner exactly what’s expected before you agree.
How long does a DRO stay on my credit file?
Six years from the date it was made. It’s also on the Individual Insolvency Register during the 12-month DRO period plus three months.
Will I lose my car if I go bankrupt?
Not necessarily. You may be able to keep a car if you need it and it’s not worth much. Expensive cars may be sold. Ask a debt adviser about your situation.
Summary
- DMP: informal, repay in full more slowly, free from charities.
- DRO: free, 12 months, for low income, few assets and no home.
- IVA: legal agreement to repay part of your debt over years, with fees; can protect your home.
- Bankruptcy: £680, usually ends after 12 months, but can affect your home and job.
- Always get free advice first.
Next step: see where to get free debt advice, or go back to the debt and credit UK guide.
General information only. I’m not a debt adviser. Please speak to a free, confidential debt advice service before choosing any formal debt solution.
Sources (checked 4 November 2026): GOV.UK: Debt Relief Orders · GOV.UK: Individual Voluntary Arrangements · GOV.UK: apply for bankruptcy · GOV.UK: changes to Debt Relief Orders · GOV.UK: options for dealing with your debts