There are four main debt solutions in England and Wales — a debt management plan, a debt relief order, an individual voluntary arrangement and bankruptcy — and they are not a ladder from mild to severe. Each one is designed for a different combination of debt level, assets and income, and the route that suits someone with a home and a steady wage is rarely the route that suits someone renting on a low income. This page sets out what each involves, what it costs and who it is built for, so the decision is made on fit rather than on whichever firm advertises hardest.
Nothing here is a recommendation, and none of it replaces regulated advice. Free, FCA-regulated debt advice is available from the MoneyHelper debt advice locator, StepChange, National Debtline on 0808 808 4000 and Citizens Advice. None of them charge, and all of them can set up the same statutory solutions a fee-charging firm would.
Two families: informal arrangements and formal insolvency
Every route falls into one of two groups, and the distinction matters more than the individual names.
Informal arrangements are agreements between you and your creditors. They are not binding on either side. A creditor can accept reduced payments for a year and then change its mind, and you can stop or vary the arrangement without a court process. Flexibility is the advantage; the absence of protection is the cost.
Formal insolvency solutions are created by statute. Once one is in place, creditors bound by it cannot pursue the included debts outside its terms. Protection is the advantage; the cost is that the arrangement is rigid, it is recorded publicly, and leaving it early is difficult.
Deciding which family you are in is usually a bigger question than choosing between the options inside it.
Debt management plans: informal and not legally binding
A debt management plan is an arrangement to pay non-priority debts at a reduced monthly rate, usually administered by a free charity or a fee-charging firm. Interest and charges are often frozen, but there is no legal obligation on a creditor to do so, and no obligation to stay frozen.
It suits people whose income is expected to recover, whose debts are large but not overwhelming, and who want to repay in full over time. It does not write anything off, and it does not protect against enforcement. Our guide to what happens to your credit file when a plan finishes covers the part most people are not warned about: completion does not clear the record.
Debt relief orders: for low income and few assets
A debt relief order is a formal insolvency route for people with low income, minimal assets and debts within a statutory limit. It is administered by the Insolvency Service through an approved intermediary rather than through a court hearing, and there is no monthly payment: qualifying debts are written off at the end of the moratorium period if circumstances have not improved.
The eligibility thresholds — the debt ceiling, the value of assets you may hold, and the surplus income allowed — are set in law and have been revised more than once. Do not rely on a figure quoted in an article, including this one. Check the current limits on GOV.UK or with an approved intermediary before assuming you qualify or that you do not.
Individual voluntary arrangements: binding, and capable of failing
An individual voluntary arrangement is a legally binding agreement, supervised by an insolvency practitioner, to pay an agreed amount over an agreed term. Once creditors representing the required majority approve it, the rest are bound too, which is what stops individual creditors from breaking ranks.
Two things get understated when an IVA is sold. The first is the fee structure: the insolvency practitioner’s costs come out of the payments made, so early payments may do less to reduce debt than expected. The second is failure. An arrangement that collapses part-way through can leave the original debts outstanding, with the payments already made largely absorbed. Ask about both before signing, and ask what happens if income drops.
Bankruptcy: the route people avoid for the wrong reasons
Bankruptcy is applied for online and decided by an adjudicator rather than in open court. It is often treated as a last resort when for some situations — no property, no realistic prospect of repayment, an income that will not improve — it is the more sensible route.
The real consequences are asset-related and occupational. A home with equity may be affected, a vehicle above a certain value may be, and some professions carry restrictions that make bankruptcy genuinely unsuitable. Those are the questions to work through with an adviser, rather than the reputational fear that stops most people from asking.
Administration orders and county court alternatives
An administration order is available in limited circumstances where there is a county court judgment and total debts fall below a statutory ceiling. It consolidates payments through the court. It is used far less than the four main routes, but it is worth asking about if your situation includes a judgment and relatively modest overall debt.
Breathing space is not a solution — it is time
The Debt Respite Scheme, usually called breathing space, pauses interest, charges and most enforcement while you get debt advice. It is not a debt solution and it does not reduce anything. It exists so that a decision can be made without a creditor forcing the pace. It is accessed through a debt adviser, not applied for directly.
The routes compared
| Route | Type | Binding on creditors | Public record | Suits |
|---|---|---|---|---|
| Debt management plan | Informal | No | No | Income expected to recover; repayment in full over time |
| Debt relief order | Formal insolvency | Yes | Yes — Individual Insolvency Register | Low income, minimal assets, debts under the statutory limit |
| Individual voluntary arrangement | Formal insolvency | Yes, once approved | Yes — Individual Insolvency Register | Regular surplus income, often assets worth protecting |
| Bankruptcy | Formal insolvency | Yes | Yes — Individual Insolvency Register | No realistic prospect of repayment; few assets at risk |
| Administration order | Court-based | Yes | Court record | Existing county court judgment, modest total debt |
What actually decides which route fits
Four questions narrow the field faster than any comparison table:
- What do you owe, and to whom? Priority debts — rent, mortgage, council tax, energy, court fines — carry consequences that non-priority debts do not, and they are handled first regardless of which route you eventually take.
- What do you own? Property with equity and a vehicle above a modest value change the calculation more than the size of the debt does.
- What is left after essentials? A regular surplus points towards an arrangement that repays; no surplus points towards insolvency.
- Where do you live? This is load-bearing. None of the routes above exist in Scotland, which runs an entirely separate statutory system — see debt solutions in Scotland. Northern Ireland has its own framework and its own courts.
If you are at the earlier stage of working out whether there is a problem at all, our guides to the first seven days of acting on a debt problem and the signs that debt is becoming unmanageable come before this page, not after it. The debt reduction calculator and the compare debt options page are useful once the figures are in front of you.
Where to get this checked, for free
Every solution described here can be arranged through a free, FCA-regulated service. The statutory arrangement is identical whether a charity or a fee-charging firm sets it up — what differs is what comes out of the payments. Our list of free debt advice charities and helplines covers who does what. Before signing anything with a fee-charging firm, check it on the FCA register and confirm the trading name matches.
Common questions
Can I switch from one solution to another?
Sometimes, but not freely. Moving from an informal plan into a formal solution is common. Leaving a formal arrangement part-way through has consequences that depend on the route and on why it ended, so it is a decision to take with an adviser rather than unilaterally.
Will any of these stop bailiff action?
Formal insolvency routes and breathing space provide protection against most enforcement for included debts. An informal debt management plan does not. If enforcement agents are already involved, say so at the start of a debt advice appointment — it changes the order in which things are dealt with.
Do these solutions cover every debt?
No. Certain debts — including some court fines, student loans and family court obligations — are treated differently or cannot be included at all. Which debts are excluded varies by route, and it is one of the first things an adviser will check.
How long does each one stay on my credit file?
Formal insolvency routes are typically recorded for six years from the date they begin, while individual defaults run six years from their own default date rather than from the date a solution ends. Our guides on credit files after a debt relief order and after an IVA go through what to check.
Can I get a mortgage afterwards?
Lenders assess this individually and their criteria vary. Our guide to what lenders may consider after an IVA, DRO or DMP sets out the factors that tend to matter, without pretending any outcome is guaranteed.
Next step
Work out which family you are in — informal arrangement or formal insolvency — before comparing individual routes, then take the figures to a free regulated adviser to confirm it. Start with the compare debt options page, and use the MoneyHelper locator to find an adviser near you.
Eligibility thresholds, fees and statutory limits for these solutions are set in law and are revised periodically. Nothing on this page is regulated debt advice, and no outcome described here is guaranteed. Confirm current rules on GOV.UK or with an FCA-regulated adviser before acting.