Debt solutions compared: IVA, bankruptcy, DRO and more

What debt solutions are there in England and Wales?

If you cannot afford your debts, the main options in England and Wales are an Individual Voluntary Arrangement (IVA), a debt relief order (DRO) or bankruptcy (formal insolvency), a debt management plan or an informal arrangement with your creditors (not legally binding), and the Breathing Space scheme as a temporary pause while you get advice. A seventh, the administration order, is for people with a court judgment and debts under £5,000. GOV.UK sorts them (opens in a new tab) by whether you can pay something towards your debts, cannot pay at all, or need time to get advice first.

A free, independent debt adviser can go through every one of these with you before you choose, and the last section of this page says where to find one.

Some are agreements your creditors can walk away from. A debt management plan, token payments and a settlement offer only hold for as long as each creditor goes along with them. Others are formal procedures set out in law. Once approved, an IVA binds every creditor who was entitled to vote and stops them taking action over those debts, and creditors listed in a DRO cannot ask you for payment while it runs.

The formal procedures are public. An IVA, a DRO and a bankruptcy each go on the Individual Insolvency Register, and each comes off 3 months after it ends (opens in a new tab).

Which debt solution is right for me?

The right debt solution depends on how much you owe, how much income you have left after essential bills, what you own and whether you own your home; GOV.UK puts it simply (opens in a new tab): "Your options depend on the amount of money and assets you have." Each option has its own limits and its own costs, and the same person can qualify for more than one.

The points that usually narrow the choice are these:

• How much you owe in total. A DRO is only for debts of £50,000 or less, and an administration order only for judgment debts under £5,000.
• Whether anything is left each month after rent, bills and food. A plan or an IVA needs a regular payment; a DRO is for people with £75 a month or less to spare.
• What you own. A DRO allows assets of no more than £2,000, plus one vehicle worth less than £4,000. In bankruptcy a trustee deals with what you own, including your share of a home.
• Whether you live or work in England or Wales. Breathing Space and DROs are only for people with that connection.

Which debt solutions write off debt?

Three debt solutions can end your liability for debts you have not repaid: a DRO, bankruptcy and an IVA. A DRO ends the listed debts after 12 months, bankruptcy usually ends after 12 months with discharge from the bankruptcy debts, and an IVA can be an agreement to repay part of what you owe, on terms your creditors vote to accept. Our guide to writing off debt sets out which debts each one leaves behind.

A debt management plan, an administration order and Breathing Space do not write debt off by themselves. A creditor can still choose to write off a balance, but nothing makes it do so.

What does each debt solution cost?

A debt relief order costs nothing since 6 April 2024, bankruptcy costs £680 to apply, and an IVA usually has two fees (opens in a new tab), a set-up fee and a handling fee, which in a protocol IVA come out of your monthly payments. The table gives the official figure wherever a source states one. Fees charged by firms vary, so ask for them in writing before you agree to anything.

A debt management plan can be free: GOV.UK says (opens in a new tab) you can set one up with your creditors yourself, and some companies charge a set-up fee and a handling fee. Breathing Space is free to apply for, though GOV.UK notes some debt advisers may charge.

Where can I get free, independent debt advice?

Free, confidential and independent debt advice is available from services GOV.UK lists (opens in a new tab), including National Debtline, StepChange Debt Charity and Citizens Advice, and MoneyHelper can help you find more; self-employed people can use Business Debtline (opens in a new tab). A debt adviser of this kind can look at every option, including the ones we cannot provide, and an authorised adviser is who applies for Breathing Space or a debt relief order for you.

NTF Financial Solutions is a commercial insolvency practice, and fees apply to the IVA work our practitioners do.

James Kaye and Nick Morgan are licensed insolvency practitioners, so they can act in an IVA and advise on bankruptcy. We cannot arrange the other options, and fees apply to an IVA. If you would like to compare an IVA with the alternatives in detail, our guides set out how an IVA compares with bankruptcy and how an IVA compares with a debt management plan.

Can I go to prison for debt?

You cannot be sent to prison for owing consumer debts such as credit cards or loans: the Debtors Act 1869 (opens in a new tab) abolished imprisonment for debt, with exceptions such as unpaid court fines, which a magistrates' court can enforce by committal to prison (opens in a new tab) in some cases. In England, but not in Wales since 1 April 2019, magistrates can commit someone to prison for up to 3 months for unpaid council tax, but only after bailiffs cannot recover enough and the court finds wilful refusal or culpable neglect.

That council tax power is in regulation 47 of the Council Tax (Administration and Enforcement) Regulations 1992 (opens in a new tab), and GOV.UK says (opens in a new tab) the court first considers whether you can afford to pay and whether you have a valid reason not to. If you have council tax arrears or a court fine, deal with them first, because they carry powers that ordinary debts do not.

Can creditors chase my family for my debts?

A creditor can pursue anyone who is jointly liable for a debt, for the whole amount, and anyone who guaranteed it. The Insolvency Service's DRO guidance (opens in a new tab) puts it this way: "Each individual who is jointly and severally liable for a debt is liable for the whole amount of the debt until it is paid in full."

A debt solution protects only the person it is made for. A DRO, for example, does not protect or write off the liability of anyone who is jointly liable with you or who guaranteed the debt, so a joint borrower or guarantor may want their own advice.