Debt Solutions

• An Insolvency Practitioner looks at your income, outgoings and debts, and works out what you can realistically afford.
• They write a proposal and send it to your creditors. If creditors owed at least 75% of the debt (by value, of those who vote) agree, the IVA is approved and binds all your unsecured creditors.
• You make one monthly payment to your Insolvency Practitioner, who shares it between your creditors.
• Interest and charges on the debts included are frozen, and creditors included in the IVA can’t take further action against you.
• Your payments are reviewed each year. If your income goes up or down, they may change.

An IVA may suit you if you owe several creditors, have a regular income and can afford a consistent monthly payment, but can’t realistically pay your debts back in full within a reasonable time. It’s often considered by homeowners who want to avoid bankruptcy.

• One affordable monthly payment, based on what you can afford
• Interest and charges are frozen on the debts included
• Any debt left at the end is legally written off
• Creditors included in the IVA can’t take further action, such as court action
• You don’t usually have to sell your home

• An IVA will affect your credit rating. It stays on your credit file for 6 years from the date it starts, and your details appear on the public Individual Insolvency Register while it’s running.
• If you own your home, you may be asked to release equity in the final year, for example by remortgaging. If you can’t, the IVA is usually extended by up to 12 months.
• You’ll need to stick to a budget for the whole IVA, and getting new credit will be difficult.
• If you can’t keep up your payments, the IVA may fail. Your creditors could then take action again, and your supervisor could apply to make you bankrupt.
• Some debts can’t be included, such as student loans, court fines and child maintenance. Secured debts like your mortgage stay outside the IVA.
• Creditors don’t have to agree to your proposal.

There’s no upfront fee. The Insolvency Practitioner’s fees for setting up the IVA (the nominee fee) and running it (the supervisor’s fee) are taken from your monthly payments, and creditors agree to them as part of your proposal. They’re always explained to you in writing before you decide. Read more about IVA fees and costs.

• A provider works out an affordable monthly payment, after your essential bills and priority debts such as rent, mortgage and council tax.
• They contact your creditors and ask them to accept reduced payments, and usually to freeze interest and charges.
• You make one monthly payment, and the provider pays your creditors.
• The plan continues until your debts are repaid in full, or you change to a different solution.

A DMP may suit you if you can afford to pay your debts back in full, just more slowly, or if your situation is temporary and you want flexibility.

• One affordable monthly payment
• Flexible: payments can change if your circumstances change, and you can stop at any time
• Not a formal insolvency, so it doesn’t appear on the Insolvency Register
• Free DMPs are available from some providers

• It isn’t legally binding. Creditors don’t have to accept reduced payments or freeze interest and charges, and they can still take action against you.
• No debt is written off. You repay everything you owe, which can take many years.
• Your credit rating is likely to be affected, as accounts may show arrears or be defaulted.
• Priority debts such as mortgage, rent, council tax and energy bills can’t be included and must be paid separately.

Some providers, including debt charities, run DMPs for free. Others charge a set-up fee and a monthly management fee, which means less of your payment goes to your creditors and the plan can take longer. Always check the fees before you agree.

• You apply through an approved intermediary, a specially authorised debt adviser, often at a free debt advice charity. The application goes to the Official Receiver.
• For 12 months you don’t have to pay the debts included, and creditors can’t take action to recover them without court permission.
• At the end of the 12 months, the debts included are written off.

In England and Wales, you can usually apply if:

• you owe less than £50,000 in total
• you have less than £75 a month spare after your normal household expenses
• your savings and assets are worth less than £2,000 in total, and you don’t own your home
• any vehicle you own is worth less than £4,000
• you haven’t had a DRO in the last 6 years

• It’s free to apply
• It only lasts 12 months
• Your debts are written off at the end if your situation hasn’t changed
• Creditors included can’t chase you during the order

• A DRO will affect your credit rating. It stays on your credit file for 6 years, and your details appear on the Individual Insolvency Register.
• During the order you mustn’t borrow more than £500 without telling the lender about your DRO, and you can’t be a company director without court permission.
• If your situation improves during the 12 months, for example your income rises or you receive money, the DRO may be cancelled.
• Some debts can’t be included, such as student loans, court fines and child maintenance.

There’s no fee to apply for a DRO. Approved intermediaries can’t charge you for helping you apply.

• You apply online to the government’s Insolvency Service. A decision usually takes up to 28 days. A creditor you owe £5,000 or more can also apply to make you bankrupt.
• An Official Receiver, or a trustee, takes control of your assets and may sell them to pay your creditors.
• If you have spare income, you may have to make monthly payments for up to 3 years.
• You’re usually discharged (freed from most of your debts) after 12 months.

Bankruptcy may suit you if you can’t pay your debts within a reasonable time, have little or no spare income, and other options such as an IVA or DRO aren’t suitable or available to you.

• Most of your debts are written off, usually after 12 months
• Creditors included must stop chasing you and taking action
• It gives you a clear, fresh start

• If you own your home, it may have to be sold, or you may need to buy back your share of it.
• Other valuable assets, such as an expensive car, may be sold.
• Bankruptcy will seriously affect your credit rating. It stays on your credit file for 6 years, and your details appear on the Individual Insolvency Register.
• While you’re bankrupt you can’t borrow more than £500 without saying you’re bankrupt, or be a company director without court permission.
• It can affect some jobs, for example in law, finance or the police, and some professional memberships.
• Some debts aren’t written off, such as student loans, court fines and child maintenance.

The application fee is £680, which you can pay in instalments. You can apply yourself at gov.uk/apply-for-bankruptcy.

A government scheme that gives you 60 days’ protection from most creditor action, with interest and charges frozen, while you get advice. You apply through a debt adviser. A separate mental health crisis Breathing Space lasts as long as your crisis treatment, plus 30 days.

You can contact your creditors directly to agree lower or token payments, or offer a lump sum in full and final settlement if you have one. Creditors don’t have to agree, and it isn’t legally binding.

A new loan to pay off your existing debts, leaving one monthly repayment. It can help if you can get a lower interest rate, but it’s still borrowing. A loan secured on your home puts your home at risk if you can’t keep up repayments.

The rules are different. In Scotland, the main options include Protected Trust Deeds, the Debt Arrangement Scheme and sequestration. In Northern Ireland, IVAs, DROs and bankruptcy are available but with different limits. Ask us, or MoneyHelper, about the options where you live.