YOUR OPTIONS
Different debt solutions work in different ways. Before proceeding with an Individual Voluntary Arrangement, it is important to understand whether another option may be more appropriate for your circumstances.
THE RIGHT ROUTE DEPENDS ON YOU
The right option can depend on how much you owe, your income and expenditure, your assets, whether you own a property and how your circumstances are likely to change.
In England and Wales, alternatives to an IVA can include a Debt Management Plan (DMP), Debt Relief Order (DRO), bankruptcy or an informal repayment arrangement with creditors. Each has different eligibility requirements, protections, costs and consequences. The right choice depends on your circumstances, not simply the amount you owe.
OTHER SOLUTIONS
These options have different eligibility criteria, consequences and levels of formality. Which ones are relevant depends on your individual financial position.
A Debt Management Plan is an informal arrangement to repay eligible debts at an affordable rate. It may suit someone who can repay what they owe over time, but creditors are not legally bound to accept the plan and may continue interest or charges.
A DMP does not normally involve formal insolvency, but it may take longer to clear debts and can affect your credit record.
A Debt Relief Order is a formal insolvency option for people who meet specific limits on qualifying debts, spare income and assets. It is usually arranged through an approved debt adviser.
A DRO can be appropriate where there is little ability to repay debts and the eligibility conditions are met. It has consequences for credit and is recorded on the public insolvency register.
Bankruptcy is a formal insolvency process that can deal with debts someone cannot afford to repay. It may be appropriate in some circumstances, but property, other assets and surplus income can be affected.
Bankruptcy can also affect certain jobs and business activities. Its implications should be understood before applying.
It may be possible to contact creditors directly, request temporary breathing space or negotiate affordable repayment terms without entering a formal insolvency procedure.
These arrangements depend on creditor agreement and generally do not provide the same legal protection as a formal insolvency solution.
This isn't an exhaustive list.
Other options and temporary protections may be available depending on your circumstances. The important point is that an IVA should be considered alongside realistic alternatives, rather than in isolation.
UNDERSTANDING THE DIFFERENCES
The main distinction is whether an arrangement is informal or a formal insolvency process. Formal procedures have legal consequences and eligibility requirements, while informal plans depend more heavily on creditors continuing to cooperate.
| Option | Type | Important distinction |
|---|---|---|
| IVA | Formal insolvency | Approved terms bind included creditors; ongoing obligations apply. |
| DMP | Informal | Creditors are not legally bound to freeze interest or accept repayments. |
| DRO | Formal insolvency | Strict eligibility conditions relating to debts, income and assets. |
| Bankruptcy | Formal insolvency | Assets, income and some occupations may be affected. |
| Direct arrangements | Informal | Terms are negotiated with individual creditors and may change. |
This is a high-level comparison, not a recommendation. Every option can affect your finances and credit record differently.
COMMON QUESTIONS
Neither is automatically better. A DMP is informal and usually involves repaying debts in full over time, whereas an IVA is a formal agreement with binding terms for included creditors. The appropriate option depends on affordability, debts, assets and other circumstances.
Possibly. DRO eligibility depends on specific debt, asset and disposable-income criteria, as well as other conditions. An approved debt adviser can assess whether a DRO is available and appropriate for you.
No. Bankruptcy has significant consequences, especially for assets and some occupations, but an IVA also involves ongoing obligations and can fail if its terms cannot be met. The better option depends on your individual circumstances.
No. Making an enquiry does not commit you to an IVA. Your financial circumstances and realistic alternatives should be considered before you decide whether to proceed with any formal solution.
A GOOD PLACE TO START
Start by telling us a little about your circumstances. Our short enquiry doesn't commit you to an IVA and your details come directly to our insolvency practice.