Debt solutions explained: DMP, DRO, IVA and bankruptcy

Start with free debt advice

Which option suits you depends on how much you owe, what you own and how much money you have left each month. A debt adviser can go through this with you and explain what each option would mean. Free services such as StepChange, National Debtline and Citizens Advice will not charge you, and MoneyHelper lists other free advisers.

Be careful with firms that charge. The FCA has warned that some people are steered towards fee-paying debt solutions that may not suit them. Free debt advice is always available, so you never need to pay for it.

If creditors are pressing you while you decide, Breathing Space can give you up to 60 days of protection. Creditors cannot add interest or charges, take enforcement action or contact you about the debts it covers. Our Breathing Space guide explains how it works.

The options at a glance

This table compares the main debt solutions in England and Wales. Each one is explained in more detail below.

Debt management plan (DMP)

A debt management plan is an agreement between you and your creditors to pay all of your debts. It is usually used if you can only afford to pay a small amount each month, or if you have debt problems now but will be able to make repayments in a few months.

You can set one up with your creditors yourself, or through a debt management company authorised by the FCA. You can check a company on the FCA Register. With a company, you make one regular payment to it and it shares the money out between your creditors. Some companies charge a set-up fee and a fee each time you pay. StepChange, a debt charity, does not charge any fees for its plans.

A DMP is informal. Your creditors do not have to agree to it. Unless the agreement says otherwise, they can still ask you to pay the full debt later, or take action to recover their money, even if you keep up your payments. A DMP only covers unsecured debts, and it can be cancelled if you do not keep up your repayments.

Individual voluntary arrangement (IVA)

An IVA is a formal agreement with your creditors to pay all or part of your debts. You make regular payments to an insolvency practitioner, who works out what you can afford and how long the IVA lasts, then divides the money between your creditors.

It starts if creditors holding 75% of your debts agree to it, and it then applies to all your creditors, including any who disagreed. It stops your creditors taking action against you for your debts, and it can give you more control over what you own than bankruptcy.

There are usually two fees: a set-up fee and a fee each time you make a payment. Find out what it will cost before you ask an insolvency practitioner to act for you. If you do not keep up your payments, the insolvency practitioner can cancel the IVA and can make you bankrupt.

Your IVA is added to the Individual Insolvency Register and removed 3 months after it ends.

Debt relief order (DRO)

A DRO is for people with lower debts and very little money to spare. You must owe less than £50,000, have less than £75 a month spare income, have less than £2,000 in savings and other assets, and not own a vehicle worth £4,000 or more.

You stop paying the debts in it for 12 months, and after that you do not have to pay them. It is free, and an approved debt adviser applies for you. You still pay your rent, bills and any debts a DRO cannot include, such as student loans.

Our guide to debt relief orders explains who qualifies, the rules you must follow and how to apply.

Bankruptcy

Bankruptcy can free you from most of your debts. Applications are made online only, and cost £680. If you are struggling to pay the fee, a charity may be able to help. Someone you owe £5,000 or more can also apply to a court to make you bankrupt if you do not pay.

An adjudicator at the Insolvency Service checks your application, and you will usually hear within 28 days whether you have been made bankrupt. An official receiver then deals with your bankruptcy.

Valuable possessions can be sold to pay for your bankruptcy and towards your debts. That can include your home, if your equity in it is more than £1,000. You can usually keep things you need for your job and essential household items such as clothing, bedding and furniture. If you have spare income, you may agree to make monthly payments for up to 3 years. If your main or only income is from state benefits, you will not normally be asked to.

Your name and address are published in the Gazette and on the Individual Insolvency Register. If publishing your address would put you at risk of violence, you can apply to the court to keep it private. While you are bankrupt, you must tell a lender before borrowing more than £500, and you cannot act as a company director without the court’s permission. You are usually released after 12 months.

Some debts are not cleared. You must keep paying student loans, secured debts such as a mortgage if you stay in the property, debts from fraud, and budgeting or crisis loans owed to the Department for Work and Pensions. You might still have to pay child maintenance debts.

Administration orders

If a county court or High Court judgment has been made against you and you owe less than £5,000 in total to at least 2 creditors, you can apply to your local court for an administration order. You make one payment a month to the court, which divides it between your creditors.

Creditors listed on the order cannot take further action against you without the court’s permission. There is a court fee each time you pay, which cannot be more than 10% of your debt. If you do not keep up your payments, the court can take money from your wages or cancel the order.

How each option shows on your credit file

A debt relief order and a bankruptcy each stay on your credit file for 6 years, and GOV.UK says this is the same as other debt relief options. MoneyHelper says public records such as bankruptcies, DROs and IVAs can stay on your report for up to six years, or longer in some circumstances.

IVAs and DROs also appear on the Individual Insolvency Register and are removed 3 months after they end. Our guide to what lenders can see on your credit file explains what lenders see and for how long.

If you live in Scotland or Northern Ireland

The options above are for England and Wales. Scotland and Northern Ireland have their own systems.

In Scotland, the Debt Arrangement Scheme lets you repay your debts through a debt payment programme. You can only apply through a DAS approved money adviser. While it runs, creditors cannot add more interest, fees or charges, ask you for money or take you to court. Bankruptcy in Scotland costs £150 to apply for, through an approved money adviser or insolvency practitioner. The Minimal Asset Process is a form of bankruptcy for people with few assets, no disposable income and debts under £25,000.

Northern Ireland has its own debt relief orders, with similar limits: debts of no more than £50,000, other assets of no more than £2,000 plus a car worth up to £4,000, and no more than £75 a month disposable income. Bankruptcy in Northern Ireland needs a £525 deposit and a £189 court fee.

Wherever you live, a free debt adviser can explain which option fits your situation.

Common questions

Which debt solution is best?

It depends on how much you owe, what you own and what you can afford each month. A free debt adviser can look at your situation and explain your options. Be wary of any firm that pushes a fee-paying option without looking at the alternatives.

Is a debt management plan the same as an IVA?

No. A DMP is an informal agreement to pay all your debts, and creditors do not have to agree to it. An IVA is a formal agreement to pay all or part of your debts, set up by an insolvency practitioner. Once creditors holding 75% of your debts agree, it applies to all of them.

Will I lose my home if I go bankrupt?

You might. If your equity in your home is more than £1,000, the trustee can sell it or put a charge on it. If the trustee has not started to deal with your home within 3 years, it is usually transferred back to you. If you rent, it is unlikely you will be asked to move out if you are up to date with your rent.

How much does each option cost?

A debt relief order is free. Bankruptcy costs £680 to apply for. IVAs usually have a set-up fee and a fee on each payment, and some debt management companies charge similar fees. StepChange does not charge for its debt management plans.

Can a creditor make me bankrupt?

Yes, if you owe them £5,000 or more and do not pay. They usually have to try other legal ways first, such as a statutory demand or a court judgment. You can oppose a bankruptcy petition, but you must do it at least 5 days before the hearing. Get free debt advice straight away.

Sources

Every fact in this page was checked against these official sources on 5 November 2026.

1. Options for dealing with your debts GOV.UK
2. Becoming bankrupt GOV.UK
3. How to get a Debt Relief Order (DRO) Insolvency Service
4. Debt advice warning: spot the red flags Financial Conduct Authority
5. Debt management plan StepChange Debt Charity
6. How to go bankrupt mygov.scot
7. What is the Debt Arrangement Scheme (DAS) mygov.scot
8. Bankruptcy nidirect

Written and fact-checked by the PiggyBank editorial team. Last reviewed 5 November 2026. This guide is general information, not financial advice. How we write and check our guides.