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Key takeaways
- A DMP is informal, flexible and free to set up, but it does not legally bind creditors
- An IVA is legally binding, runs for years, costs fees and suits people with steady income and larger debts
- A DRO is for people with low debts, low surplus income and few assets
- Bankruptcy writes off most debts but can affect your assets and home
- Get free advice before choosing, and compare the total cost and consequences
If you cannot keep up with your debts, the UK has several formal and informal routes out. The four most common are a debt management plan, an Individual Voluntary Arrangement, a Debt Relief Order and bankruptcy. They are very different in cost, length, legal protection and long-term consequences, and the best one for you depends on your debts, income, assets and housing. This guide compares them side by side in plain English, so you can ask better questions when you speak to a free adviser.
The four options in one table
Treat the table as a guide. Rules, fees and limits change, so check the current figures on GOV.UK or with a free adviser before you decide.
| Debt management plan | IVA | Debt Relief Order | Bankruptcy | |
|---|---|---|---|---|
| Type | Informal agreement | Formal, legally binding | Formal, legally binding | Formal, court-based |
| Cost to set up | Free with charities | Practitioner's fees | Application fee | Application fee |
| Typical length | Until debts are repaid | Often five to six years | Usually 12 months | Usually discharged after 12 months |
| Protects you from creditors | Not legally | Yes, once approved | Yes, during the order | Yes |
| Debt written off | Rarely, unless creditors agree | Yes, at the end | Yes, at the end | Yes, most debts |
| Home at risk | No | Equity may be reviewed | Not usually open to owners | Yes, possibly |
| Credit record | Flagged for the plan | Six years from start | Six years from start | Six years from start |
| Best for | Affordable repayments over time | Steady income and larger debts | Low income, low debts, few assets | No realistic way to repay |
Debt management plan (DMP)
A debt management plan is an informal agreement to repay your debts at a rate you can afford. A debt charity such as StepChange can set it up for free. Creditors are asked to freeze interest and charges, but they do not have to, and a creditor can still take court action. A DMP suits people who can repay in full over a longer time and want flexibility.
Individual Voluntary Arrangement (IVA)
An IVA is a legally binding agreement run by an insolvency practitioner. GOV.UK says it starts if creditors holding 75% of your debts agree, and it then binds all of them. You make payments for several years and the rest of the included debt is written off. It costs fees and appears on your credit file and the public register. It suits people with steady income and substantial unsecured debt who want a defined end.
Debt Relief Order (DRO)
A Debt Relief Order is designed for people with low debts, low surplus income and few assets. It must be applied for through an approved intermediary, typically a free debt adviser. Your debts are frozen for a period, usually 12 months, and are written off if your circumstances have not improved. There are eligibility limits that change from time to time, so check them with an adviser.
Bankruptcy
Bankruptcy is a court-based process that writes off most debts. An official receiver or trustee manages your estate, and you may lose assets, including equity in your home. You are usually discharged after 12 months, though you may have to make payments from your income for longer. It has serious consequences, including restrictions on credit and some jobs, but for people with no realistic way of repaying it can be the right choice.
How to choose between them
Work through these questions in order.
- Can you afford to repay in full over time? If yes, a DMP or negotiation may be enough.
- Do you have very low income, low debts and few assets? If yes, ask about a DRO.
- Do you have a steady income and larger unsecured debts? If yes, ask about an IVA, and compare the total cost.
- Is there no realistic way to repay, and do you have little to protect? If so, bankruptcy may be the cleanest option.
- Do you own a home? This affects which solutions are open and what happens to equity.
The effect on your credit file
All formal solutions leave a record on your credit file, usually for six years from the date they start. A DMP is also recorded, although the effect differs. If you are already behind on payments, missed payments and defaults are damaging your file anyway. See our guides to IVA and your credit score and how credit scores work.
Other options to consider first
Before choosing a formal solution, check whether there is a simpler way. You could ask creditors to freeze interest, work out a realistic debt budget, use Breathing Space to pause enforcement while you get advice, or look at paying off debt faster if you can afford it. For people with one regular lump of debt and enough income, debt consolidation is another route, but it carries risks.
Where to get free advice
Free, impartial advice is available from StepChange, National Debtline and Citizens Advice. They do not earn commission if you choose one option, and they can tell you which solutions you qualify for. Avoid companies that cold call, promise to write off a set percentage before seeing your finances or charge fees for what is free elsewhere. See our overview of free debt advice in the UK.
A worked comparison
Imagine four people. Anna earns a steady salary, owes £25,000 on cards and loans and has £300 a month spare: an IVA or a long debt management plan is likely to be on her list. Ben is on a low income, owes £8,000, has no spare money and owns nothing of value: a Debt Relief Order, if he is within the limits, may fit. Carl has £60,000 of debt, no spare income and no assets he wants to protect: bankruptcy may be the cleanest answer. Dee owns her home, has £15,000 of debt and a small surplus: she needs to weigh an IVA against a debt management plan carefully because of her equity. The right answer differs for each person, which is why a free adviser should look at your own figures.
Frequently asked questions
Which debt solution is best?
Is an IVA better than bankruptcy?
Can I switch from a DMP to an IVA?
Do all debt solutions affect my credit file?
Sources and further reading
- Options for paying off your debts — GOV.UK
- Individual Voluntary Arrangements — GOV.UK
- Dealing with debt — MoneyHelper
This page provides general information only. It is not personalised financial, legal or tax advice, and rules and figures can change. Your situation is unique — please check official sources such as GOV.UK and MoneyHelper, and speak to a qualified, FCA-authorised adviser before making important decisions about your money.
Written by
MoneyBrink Editorial Team — Editorial team
The MoneyBrink Editorial Team researches, writes and reviews every guide on this site. We work from official UK sources such as GOV.UK, the Financial Conduct Authority, MoneyHelper and the Money and Pensions Service, explain things in plain English, and update articles when the rules change. We do not sell financial products and we do not give personal advice.
Read how we research and check our guides in our editorial policy.
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