When debt becomes genuinely unmanageable, formal insolvency solutions can provide a legal path to writing off what you owe and starting fresh. IVAs, Debt Relief Orders, and bankruptcy are legal systems designed precisely for this situation.
Individual Voluntary Arrangement (IVA)
An IVA is a formal agreement to repay a portion of your debts over typically 5-6 years, after which the remaining balance is legally written off. You make one monthly payment based on what you can afford.
- Repayment: typically 5-6 years at affordable monthly amount
- Remaining debt written off at end of IVA
- Need: minimum ~£6,000+ of unsecured debt
- Stays on credit file for 6 years
- Homeowners: equity may need to be released in year 5
Are IVA fees free?
No — Insolvency Practitioners charge fees, but these come from your monthly payments not on top. Avoid companies that charge upfront fees.
Debt Relief Order (DRO)
A DRO costs £90, lasts 12 months, and writes off qualifying debts under £30,000. You must have under £2,000 in assets, under £75/month disposable income, and no property.
- Cost: £90 one-time fee
- Duration: 12 months then debts written off
- Debt limit: under £30,000
- Asset limit: under £2,000
- Disposable income limit: under £75/month
- Cannot own a home or vehicle worth over £2,000
Bankruptcy
Bankruptcy application costs £680. After typically 12 months, remaining debts are discharged. An Official Receiver takes control of non-essential assets. Your home may be at risk if there is equity.
- Application fee: £680
- Typically discharged in 12 months
- Official Receiver can claim assets
- Your home may be at risk if equity exists
- Stays on credit file for 6 years
- Income Payments Agreement possible for those earning above basic needs
Getting Free Debt Advice First
Before pursuing any formal solution, get free specialist advice. The right solution depends entirely on your specific circumstances. StepChange, National Debtline, Citizens Advice, and the Debt Advice Foundation all offer free confidential advice.
- StepChange: 0800 138 1111 (free, online debt calculator)
- National Debtline: 0808 808 4000
- Citizens Advice: 0800 144 8848
- Payplan: free IVA and DMP service funded by creditors
- All advice is confidential and free — avoid paid services
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