There are several formal and informal debt solutions available in the UK. Choosing the right one depends on how much you owe, what you own, and what you can afford to pay. This guide explains each option clearly so you can make an informed decision.
Quick Comparison Table
| Solution | Duration | Write-Off | Credit Impact | Cost |
|---|---|---|---|---|
| Debt Management Plan | 3-5 years | Possible (interest/charges) | Moderate | Free |
| Individual Voluntary Arrangement | 5-6 years | Yes (remaining debt) | Severe | £1,500-£3,000 |
| Debt Relief Order | 12 months | Yes (all debt) | Severe | £90 |
| Bankruptcy | 12 months | Yes (most debt) | Very severe | £680 |
| Administration Order | Varies | Partial | Severe | None |
| Debt Consolidation Loan | 2-7 years | None | Varies | Interest charged |
Debt Management Plan (DMP)
A Debt Management Plan is an informal agreement between you and your creditors to pay back your debts at an affordable rate.
How It Works
- You make one monthly payment to a DMP provider
- The provider splits the payment between your creditors
- Creditors agree to freeze interest and charges
- The plan continues until all debts are repaid
Who Is It For?
- People who can afford to pay something but not the full amount
- People with unsecured debts (credit cards, loans, overdrafts)
- People who want to avoid formal insolvency
Eligibility
| Requirement | Detail |
|---|---|
| Debt type | Unsecured debts only |
| Minimum debt | No official minimum (some providers suggest £5,000+) |
| Income | Must have some regular income |
| Surplus income | Must have money left after essential bills |
| Residency | UK resident |
Pros and Cons
| Pros | Cons |
|---|---|
| Free to set up and run | Not legally binding — creditors can refuse |
| One simple monthly payment | Takes 3-5 years to complete |
| Interest and charges frozen | Debts not written off |
| No court involvement | Noted on your credit file for 6 years |
| Can keep all your assets | Doesn’t cover priority debts (council tax, mortgage) |
Impact on Your Credit File
A DMP is noted on your credit file but does not show as insolvency. Creditors may add default markers to your accounts, which stay for 6 years. A DMP can make it harder to get credit during the plan and for some time after.
Individual Voluntary Arrangement (IVA)
An IVA is a formal, legally binding agreement to repay a portion of your debts over 5-6 years. At the end, any remaining debt is written off.
How It Works
- An insolvency practitioner (IP) assesses your finances
- The IP proposes a repayment plan to your creditors
- If 75% of creditors (by value) agree, the IVA goes ahead
- You make fixed monthly payments for 5-6 years
- Any remaining debt is written off at the end
Who Is It For?
- People with significant unsecured debts (usually £6,000+)
- People with a regular income who can commit to fixed payments
- People who want to avoid bankruptcy
Eligibility
| Requirement | Detail |
|---|---|
| Minimum debt | Usually £6,000+ |
| Income | Must have a regular income |
| Surplus income | Must be able to afford a meaningful payment |
| Residency | UK resident |
| Creditor approval | 75% of creditors must agree |
Costs
The insolvency practitioner’s fees are paid from your monthly contribution, typically costing between £1,500 and £3,000 over the life of the IVA. You do not pay these separately — they come from the money you’re already paying.
Pros and Cons
| Pros | Cons |
|---|---|
| Legally binding — creditors must comply | Severe impact on credit file |
| Interest and charges frozen | Listed on the Insolvency Register (public) |
| Remaining debt written off | May need to release equity in your home |
| Can keep your car (below £4,000) | Failure to keep up payments means the IVA fails |
| One affordable monthly payment | IP fees reduce the amount going to creditors |
| Can last 5-6 years (shorter than DMP) | Cannot be a company director |
What Happens to Your Home?
- If you’re a homeowner, the IVA may include a clause requiring you to release equity in the final year
- If you rent, your tenancy is not affected
- If you have no equity, you may be able to remove this clause
What Happens to Your Car?
- If you own your car outright and it’s worth less than £4,000, you can usually keep it
- If it’s worth more, you may need to sell it and buy a cheaper one
- If it’s on finance, the finance company still owns it
Impact on Your Credit File
An IVA stays on your credit file for 6 years from the start date. It also appears on the Insolvency Register, which is publicly searchable. This can make it very difficult to get credit during and after the IVA.
Debt Relief Order (DRO)
A Debt Relief Order is a formal insolvency solution for people with low income, few assets, and debts they cannot pay. After 12 months, all qualifying debts are written off.
How It Works
- You apply through an approved intermediary (free service)
- The intermediary assesses your eligibility
- If approved, your debts are frozen for 12 months
- After 12 months, your debts are written off in full
Who Is It For?
- People on low income with few assets
- People who owe relatively small amounts
- People who cannot afford an IVA or bankruptcy
Eligibility
| Requirement | Detail |
|---|---|
| Total debt | Under £30,000 |
| Assets | Under £1,000 (not including vehicle, tools of trade, or household essentials) |
| Vehicle value | Under £4,000 (if you have one) |
| Surplus income | Under £75 per month after essential bills |
| Residency | England, Wales, or Northern Ireland (Scotland has the Debt Arrangement Scheme) |
| Other conditions | No existing IVA or bankruptcy, no pending court action for your debts |
Costs
A DRO costs £90, which can be paid in instalments before the DRO is granted.
Pros and Cons
| Pros | Cons |
|---|---|
| All qualifying debts written off | Debts must be under £30,000 total |
| Frozen for 12 months | Assets must be under £1,000 |
| No monthly payments | Severe impact on credit file |
| Free advice available | Listed on the Insolvency Register |
| Relatively quick process | Cannot take out credit over £500 during the DRO |
| Some debts not covered (student loans, court fines) |
Impact on Your Credit File
A DRO stays on your credit file for 6 years from the approval date. During the DRO, you cannot take on new credit of more than £500 without telling the lender about your DRO.
Debts Not Covered by a DRO
- Student loans and maintenance loans
- Court fines and compensation orders
- Child maintenance arrears
- Debts from fraud
- Council tax arrears (for the period before the DRO)
- TV licence arrears
Bankruptcy
Bankruptcy is a last resort for people who cannot pay their debts. It clears most debts but has serious consequences that last for years.
How It Works
- You apply to the Insolvency Service (or a creditor can petition to make you bankrupt)
- You pay a £680 fee
- A trustee is appointed to manage your finances
- Your assets may be sold to pay creditors
- After 12 months, you are discharged from bankruptcy
Who Is It For?
- People with debts they cannot pay and no realistic way to repay them
- People who owe more than they own
- People for whom other debt solutions are not suitable
Eligibility
| Requirement | Detail |
|---|---|
| Debt type | Any type of debt |
| Minimum debt | None |
| Assets | None (or assets that can be sold to pay debts) |
| Residency | UK resident or have lived/worked in UK in last 3 years |
Costs
The bankruptcy fee is £680, which must be paid in full before the application is processed. You can apply online or at your local county court.
What Happens to Your Assets?
| Asset | What Happens |
|---|---|
| Home | May need to be sold (joint owners given 12 months to buy out the trustee’s share) |
| Car | May be sold if you don’t need it for work |
| Savings | All savings are used to pay debts |
| Investments | All investments are sold |
| Valuables | Items of value may be sold |
| Tools of trade | Up to £1,350 value — may be kept |
| Pension | Usually protected |
Income Payments Order
If you have surplus income after essential bills, the trustee can require you to make monthly payments for up to 3 years (called an Income Payments Order).
Who Cannot Be Made Bankrupt?
You cannot petition for your own bankruptcy if:
- You are already bankrupt
- You have an active IVA
- You have been discharged from bankruptcy in the last 5 years (limited exceptions apply)
Pros and Cons
| Pros | Cons |
|---|---|
| Most debts written off after 12 months | £680 fee |
| No more contact from creditors | Assets may be sold |
| Fresh start after discharge | Severe impact on credit file (6+ years) |
| Bailiff action stops immediately | Listed on the Insolvency Register (public) |
| Cannot be a company director | |
| May affect your job (certain professions) | |
| May affect your spouse’s credit (if joint debts) |
Impact on Your Credit File
Bankruptcy stays on your credit file for 6 years from the date of discharge (usually 12 months after being made bankrupt). It is one of the most severe entries on your credit file and makes it very difficult to get credit, rent a property, or open a bank account during and after the bankruptcy period.
Administration Order
An Administration Order is a court-ordered repayment plan for people who have a County Court Judgment (CCJ) or equivalent court order and cannot pay it in full.
How It Works
- You apply to the county court that made the CCJ
- The court reviews your finances and sets up a repayment plan
- You make one payment to the court, which distributes it to creditors
- The order is reviewed every 6 months
Who Is It For?
- People who have a CCJ or similar court order
- People who can afford to pay something but not the full amount
- People with total debts under £5,000 (including the CCJ amount)
Eligibility
| Requirement | Detail |
|---|---|
| Debt type | Must have a CCJ or equivalent court order |
| Total debt | Usually under £5,000 |
| Residency | England, Wales, or Northern Ireland |
Costs
There is no cost to apply for an Administration Order.
Pros and Cons
| Pros | Cons |
|---|---|
| Free to set up | Only available for CCJ debts |
| One payment to the court | Court may not agree to the plan |
| Interest can be frozen | Stays on your credit file |
| Bailiff action is paused | Less flexible than other solutions |
| Court supervision | May take several years to complete |
Impact on Your Credit File
An Administration Order is noted on your credit file for the duration of the order. Once completed, it is removed.
Debt Consolidation Loan
A debt consolidation loan is not a formal debt solution — it is a new loan used to pay off multiple debts, leaving you with one monthly payment.
How It Works
- You take out a new loan (usually secured on your home or unsecured)
- You use the loan to pay off all your existing debts
- You make one monthly payment on the new loan
Who Is It For?
- People who can afford full repayments but want simplicity
- People with good enough credit to get a competitive interest rate
- People who want to consolidate without insolvency
Eligibility
| Requirement | Detail |
|---|---|
| Credit score | Must be good enough to qualify |
| Income | Must be able to afford the new loan repayments |
| Debt type | Usually for unsecured debts |
Pros and Cons
| Pros | Cons |
|---|---|
| One simple monthly payment | You still owe all the money |
| May reduce interest rate | Secured loans put your home at risk |
| No insolvency on your record | May extend the repayment period (costing more interest) |
| Quick and straightforward | Requires good credit for best rates |
Warning
A debt consolidation loan can be a good option if you qualify for a lower interest rate and are disciplined about not running up new debts. However, if you secure the loan against your home and cannot pay, you could lose your property.
Which Debt Solution Is Right for You?
Use this flowchart to find the right option:
Can you afford to pay your debts in full?
- Yes → Contact creditors to arrange a payment plan
- No → Continue below
Are your debts under £30,000 with assets under £1,000?
- Yes → Debt Relief Order may be suitable
- No → Continue below
Do you have a County Court Judgment?
- Yes → Administration Order may be suitable
- No → Continue below
Can you afford a meaningful payment each month?
- Yes → Consider an IVA (if debts are £6,000+) or a Debt Management Plan
- No → Consider bankruptcy
Do you have any assets at all?
- Yes → Consider an IVA or Debt Management Plan
- No → Bankruptcy or DRO may be suitable
Free Help and Advice
These organisations provide free, independent debt advice:
| Organisation | What They Offer | Contact |
|---|---|---|
| StepChange | Free debt advice, DMPs, IVAs, DRO applications | stepchange.org / 0800 138 1111 |
| Citizens Advice | Free general debt advice and advocacy | citizensadvice.org.uk / 0800 140 4444 |
| National Debtline | Free debt advice by phone and online | nationaldebtline.co.uk / 0808 808 4000 |
| MoneyHelper | Free government guidance on debt solutions | moneyhelper.org.uk |
| PayPlan | Free DMPs and IVAs | payplan.com |
Tip: Always get advice before choosing a debt solution. The right option depends on your personal circumstances. All the services listed above are free and confidential.
What to Do Next
- Write down all your debts — know exactly what you owe and to whom
- Work out your budget — calculate your income and essential expenses
- Contact a free debt advice service — they will help you find the right solution
- Act quickly — the sooner you act, the more options you have
- Don’t pay for debt advice — legitimate advice is always free
Debt problems are common and solvable. With the right advice and a clear plan, you can get back on track.