DMPs, IVAs, and DROs: Which UK Debt Solution Is Right for You?
A plain-English guide to the formal and informal debt solutions available in the UK, with eligibility criteria and what to expect.
TL;DR
DMP: informal, for debts under £15K, no write-off. IVA: legally binding, 5-6 years, remaining debt written off, needs 75% creditor approval. DRO: for low income/assets, debts under £50K, £90 fee. Bankruptcy: writes off most debts after 12 months, £680 fee. Get free advice from StepChange before deciding.
When debt gets to the point where you can't manage it on your own, there are several formal and informal options in the UK. Knowing the differences won't solve the problem by itself, but it'll help you have a better conversation with a debt adviser.
Debt Management Plan (DMP)
A DMP is an informal agreement between you and your creditors. You make reduced monthly payments based on what you can afford, usually through a debt management provider. DMPs aren't legally binding, so creditors don't have to accept them or freeze interest and charges. In practice, though, many do.
DMPs work best for debts under £10,000 to £15,000 and can be set up within days. Free DMPs are available through charities like StepChange and National Debtline. If a provider tries to charge you a fee to set one up, walk away.
The downside: your debts aren't written off, and your credit file will show the DMP for the duration of the plan.
Individual Voluntary Arrangement (IVA)
An IVA is a legally binding agreement that typically lasts 5 to 6 years. You make fixed monthly payments, and at the end, any remaining debt is written off. Interest and charges are frozen from the start.
You need an insolvency practitioner to set up an IVA. Your proposal must be approved by creditors holding at least 75 per cent of your debt by value. IVAs are generally suitable for debts of £10,000 or more.
An IVA will appear on the Insolvency Register and your credit file for 6 years. If you're a homeowner, you may also need to release equity from your home in the final year.
Debt Relief Order (DRO)
A DRO is for people with relatively low debts, low income, and few assets. Since June 2024, the debt threshold has been set at £50,000 (previously £30,000). Your disposable income must be under £75 per month and your assets worth less than £2,000.
A DRO lasts 12 months. During that time, creditors can't chase you for payment. At the end, if your circumstances haven't significantly improved, the debts are written off.
The application fee is £90, and you must apply through an approved intermediary, usually a debt adviser at a charity.
Bankruptcy
Bankruptcy is a formal insolvency procedure that writes off most of your debts after 12 months. It's the most serious option and has the biggest impact on your credit file and financial life. You may lose assets including your home, and certain professions restrict bankrupt individuals from practising.
The application fee is £680. Bankruptcy is typically considered only when debts are substantial and other solutions have been exhausted.
How to decide
Which option fits depends on how much you owe, your income, whether you own property, and how urgently you need relief. Look, this isn't something to figure out alone. Free, confidential advice from StepChange (0800 138 1111), National Debtline (0808 808 4000), or Citizens Advice can help you work through your options.
Our Loan Consolidation Calculator can help you see whether combining debts into a single payment would reduce your costs, and the Debt Payoff Calculator can model how long different strategies would take.
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This article is for informational purposes only and does not constitute financial advice. For personalised guidance, speak to a qualified financial adviser or contact a free UK debt charity: StepChange (0800 138 1111) or National Debtline (0808 808 4000).