Facing serious debt problems? There are four main formal and informal debt solutions available in England and Wales. This tool assesses your eligibility for each option based on your personal circumstances and shows a full side-by-side comparison so you can make an informed decision.
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your unsecured creditors to repay a portion of your debts over a fixed period, typically five to six years. IVAs are governed by the Insolvency Act 1986 and must be proposed and supervised by a Licensed Insolvency Practitioner (IP).
For an IVA to be approved, creditors representing at least 75% of the value of the debt must vote in favour. Once approved, all unsecured creditors (including those who voted against) are legally bound by its terms. The remaining unpaid balance at the end of the IVA term is written off.
Key IVA features include:
The IVA Protocol (updated 2021) sets out standard terms for consumer IVAs and is used by most Insolvency Practitioners to ensure consistency.
Bankruptcy (formally an individual bankruptcy order) is a formal court process that writes off eligible unsecured debts in exchange for giving up control of your assets and finances for a period. In England and Wales, bankruptcy is administered by the Insolvency Service (an executive agency of the Department for Business and Trade).
The current petition fee is £680, comprising a £130 adjudicator application fee and a £550 deposit for the Official Receiver. Most debtors petition for their own bankruptcy online at gov.uk/apply-for-bankruptcy.
Key bankruptcy features include:
A Debt Relief Order (DRO) is a lower-cost alternative to bankruptcy for people with low income, few assets and manageable levels of debt. Since April 2024, the eligibility thresholds were significantly raised:
DROs are applied for through approved intermediaries — typically debt advisers at Citizens Advice or other approved organisations — at no cost to the applicant. The DRO lasts 12 months, during which creditors cannot pursue you. After 12 months, all included debts are written off.
A Debt Management Plan (DMP) is an informal debt solution where you make a single monthly payment to a debt management company or charity, which distributes it pro-rata among your creditors. DMPs are most commonly arranged through free charities including StepChange and National Debtline.
Key DMP features:
This depends on your profession. During bankruptcy you cannot act as a company director, insolvency practitioner, solicitor, financial adviser or hold certain public offices. Some employment contracts contain clauses that allow dismissal upon insolvency. An IVA has fewer automatic restrictions, but some regulated professions (accountants, solicitors, financial advisers) may be affected. Always check your employment contract and professional body rules before proceeding. Free advice is available from Citizens Advice.
Generally yes, provided you follow the IVA terms. Most IVAs include an "equity clause" requiring you to attempt to remortgage in the final year to release equity for creditors. If there is little or no equity, or if you cannot remortgage, the IVA is typically extended by 12 months instead of requiring a remortgage. Unlike bankruptcy, your Insolvency Practitioner does not have the power to force a sale of your home — only a court order can do so.
Certain debts survive all insolvency processes: student loans (under the current income-contingent repayment system), child maintenance arrears, criminal court fines, DWP and HMRC overpayments obtained by fraud, confiscation orders, and debts arising from personal injury or death caused by the debtor. Social fund loans are also excluded from DROs. These debts will still need to be repaid even after discharge from bankruptcy or completion of an IVA.
IVA fees are not paid upfront by the debtor — they are taken from your monthly contributions by the Insolvency Practitioner. Typical fees include a "nominee's fee" (for setting up the IVA, usually £1,000-£2,000) and "supervisor's fees" (annual charges for managing the IVA, typically 15-20% of realisations). These fees reduce the amount paid to creditors. This is why creditors need to vote to approve the IVA — they accept lower repayment in return for a structured arrangement. Never pay upfront fees for an IVA; reputable IPs do not require this.
Yes. Self-employed individuals can use an IVA and it is often preferable to bankruptcy for those who wish to continue trading. An IVA allows you to continue running your business during the arrangement. However, the income assessment is based on your average earnings, and the surplus income payments will fluctuate in line with your actual income each year. If your trading income is irregular, your Insolvency Practitioner should factor in seasonal variations when proposing the IVA.
If you miss payments under an IVA, your Insolvency Practitioner will first attempt to agree a variation with creditors to modify the terms. If the IVA breaks down completely, it will be terminated and the Insolvency Practitioner will usually issue a certificate of failure. Creditors then recover their full rights to pursue you, and the Insolvency Practitioner may petition for your bankruptcy. Any payments you have already made will not be refunded — they will be used to cover fees and partial creditor payments. It is therefore crucial to only enter an IVA if the payment level is genuinely sustainable.