IVA & Debt Management

Problem debt affects millions of people in the UK — but most people don’t know the full range of solutions available to them. The right debt solution depends entirely on your specific circumstances: how much you owe, whether you own property, how much disposable income you have and what your long-term goals are. There are four main formal debt solutions in England and Wales: Individual Voluntary Arrangement (IVA), Debt Management Plan (DMP), Debt Relief Order (DRO) and Bankruptcy. Each has a very different profile of costs, duration, protection and consequences. Getting the wrong one can cost you years and thousands of pounds. This guide explains all four clearly, compares them side by side, and helps you identify which is most likely to be right for you.

The four main debt solutions — at a glance

IVA (Individual Voluntary Arrangement) — explained

An IVA is a formal, legally binding agreement between you and your creditors, managed by a licensed Insolvency Practitioner (IP). You make an affordable monthly payment for 5 years (sometimes 6 if you’re a homeowner with equity), and at the end, all remaining unsecured debt is legally written off. Creditors cannot pursue you, cannot add interest or charges, and cannot contact you directly — they must go through your IP.

To enter an IVA, you need the approval of 75% of your creditors by value. In practice, this threshold is met in the vast majority of cases because creditors typically recover more through an IVA than through bankruptcy.

Key IVA conditions:

• Minimum debt of approximately £7,000 owed to two or more creditors
• Minimum disposable income of around £100 per month after essential living costs
• If you own a property with equity, you may be required to remortgage in year 4 or 5 to release equity for creditors
• Any windfall (inheritance, lottery win, bonus) must be declared and may need to go toward the IVA
• You cannot take on new credit of more than £500 without your IP’s permission during the IVA

IVA warning: The Advertising Standards Authority (ASA) has taken repeated action against misleading IVA advertising. StepChange warns that many online adverts are usually for IVAs and can be misleading. Always get free, impartial debt advice from StepChange, Citizens Advice or National Debtline before committing to an IVA — not from a commercial company whose fee depends on you signing up.

DMP (Debt Management Plan) — explained

A DMP is an informal, non-legally binding agreement where a third party (debt charity or commercial provider) negotiates with your creditors to reduce your monthly payments to an affordable level. You repay your debts in full — nothing is written off — but at a lower monthly amount. There is no fixed end date: a DMP lasts as long as it takes to repay everything, which can be anywhere from 3 years to 15+ years.

Key DMP considerations:

• Creditors are not legally obliged to accept your DMP proposal or freeze interest — most do, but they can change their mind
• Because it’s informal, you can enter and exit a DMP more freely than an IVA
• Creditors can still contact you directly — unlike an IVA which prohibits creditor contact
• If you use a commercial DMP provider, fees (setup + monthly management) are taken from your payments before creditors receive anything — this extends the repayment period significantly
• Always use a free DMP provider: StepChange, National Debtline or PayPlan — never pay for a DMP

DRO (Debt Relief Order) — explained

A DRO is sometimes called “bankruptcy lite” — it provides the same fresh start as bankruptcy but costs only £90 instead of £680 and doesn’t require a court appearance. It lasts 12 months, during which you make no payments toward your unsecured debts. If your circumstances haven’t improved after 12 months, all qualifying debts are written off.

DRO eligibility criteria (England, Wales and Northern Ireland):

• Total debt under £30,000
• Assets worth less than £2,000 (car: less than £4,000)
• Disposable income of less than £75 per month after essential living costs
• You must not own property
• Must not have had a DRO in the past 6 years

DROs are applied for through an approved intermediary — not directly with the Official Receiver. Citizens Advice and National Debtline can help you find an approved DRO intermediary at no cost.

Bankruptcy — explained

Bankruptcy involves surrendering your valuable assets to a trustee appointed by the Official Receiver (OR), who sells them to repay creditors. After 12 months, you are discharged and most remaining debts are written off. The application costs £680.

Key points about bankruptcy in England and Wales:

• Your home may be sold if it has equity — though if there is little or no equity, the trustee may not pursue it
• If you have residual income after essential expenses, you may be required to make monthly payments via an Income Payments Arrangement (IPA) for up to 3 years
• Bankruptcy is advertised in the London Gazette and on the Individual Insolvency Register — it’s publicly searchable
• Certain professions (finance, law, some public sector roles) have restrictions or require declaration of bankruptcy status
• Certain debts are NOT discharged: student loans, child maintenance, court fines and fraudulent debts

Which debt solution is right for me?

Free debt advice — always start here

Before deciding on any debt solution, speak to a free debt adviser. They are legally impartial and have no financial incentive to recommend any particular product. You are under no obligation to proceed with anything they suggest.

• StepChange Debt Charity: stepchange.org — free online debt advice tool, free DMP, free IVA referral (0800 138 1111, freephone including mobiles)
• National Debtline: nationaldebtline.org — free advice, free DRO intermediary referrals (0808 808 4000)
• Citizens Advice: citizensadvice.org.uk — free advice in-person, online and by phone
• MoneyHelper: moneyhelper.org.uk — government-backed free financial guidance

Frequently asked questions