DRO, IVA and bankruptcy compared
Quick answer: The three main formal insolvency routes for individuals in England and Wales are the Debt Relief Order (DRO), the Individual Voluntary Arrangement (IVA) and bankruptcy.
The three main formal insolvency routes for individuals in England and Wales are the Debt Relief Order (DRO), the Individual Voluntary Arrangement (IVA) and bankruptcy. Each has different eligibility, costs and consequences — choosing between them needs free, regulated debt advice.
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Primary source: https://www.gov.uk/options-for-paying-off-your-debts
Debt Relief Order (DRO)
A DRO is designed for people on low income with limited assets and no realistic way of repaying debts. You can apply if your qualifying debts are no more than £50,000, your spare monthly income after essentials is £75 or less, your total assets are worth less than £2,000 (excluding a single vehicle worth up to £4,000), and you do not own your home.
There is no fee to apply (the £90 admin fee was abolished from 6 April 2024). Applications go through an authorised intermediary at a debt advice charity — you cannot apply directly.
The DRO lasts 12 months. During that time creditors cannot pursue the included debts. At the end, qualifying debts are written off completely.
Individual Voluntary Arrangement (IVA)
An IVA is a formal, legally binding agreement with creditors, set up and managed by a licensed Insolvency Practitioner (IP). You pay a single affordable monthly amount, normally for 5 or 6 years, and whatever debt is left at the end is written off.
75% of creditors by value must agree at the meeting — once approved, it binds all qualifying creditors, even those who voted against.
Fees are paid out of your monthly contributions to the IP. You should never pay an upfront fee to a 'broker' to set up an IVA — only free debt advice charities and IPs themselves should be involved.
IVAs can protect your home from forced sale, but you may be required to release equity in the final year if your circumstances allow.
Bankruptcy
Bankruptcy is the most far-reaching option. In England and Wales you apply online through the Insolvency Service for £680. Scotland uses a separate process called sequestration; Northern Ireland goes through court.
Most people are discharged from bankruptcy after 12 months. Non-exempt assets (anything beyond reasonable household goods and tools of the trade) can be sold to repay creditors, and the Official Receiver may set up an Income Payments Agreement of up to three years if you have surplus income.
Your home can be sold if there is significant equity. Some professional roles (e.g. company director, certain financial services jobs) restrict or prevent bankrupts from working.
All three appear on your credit file for six years
DROs, IVAs and bankruptcy are all recorded on your credit file for six years from the start date. They are also listed on the public Individual Insolvency Register. Expect major restrictions on new credit during and immediately after the process.
Common questions
- Which is right for me?
- It depends on your debts, income, assets and home ownership — there is no one-size answer. Always get free advice first from StepChange, National Debtline or Citizens Advice. Never pay a fee-charging firm to recommend an option.
- Can my pension be taken?
- Approved UK pensions are generally protected in bankruptcy under the Welfare Reform and Pensions Act 1999. Income from a pension already in payment can be taken into account for an Income Payments Agreement.
- Do I have to tell my employer?
- Generally no, unless your employment contract or professional regulator requires it. Some roles (e.g. solicitors, accountants, financial advisers, police) have specific rules — check your contract and professional body.