Bankruptcy, IVA Or DRO – Which Is Right For Me?

Bankruptcy, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs) are all options for managing your debts and they’re all forms of insolvency. Beyond that, however, they are three quite different solutions designed for people in different personal and financial circumstances.

Which debt solution?


This article will help you understand how these solutions work, and give you an initial indication of whether one of them might be a possible way for you to manage your debts.



Bankruptcy could be an option if you have little or no money or assets with which to repay your unsecured creditors. Whilst it’s often seen as a last resort, bankruptcy can actually be the quickest way to clear your unsecured debts as in most cases, you’ll be discharged from your bankruptcy after just 12 months.

However, declaring yourself bankrupt isn’t something you should take lightly. It’s a legal process that involves filing a Bankruptcy Petition to your local county court. Only unsecured debt may be included in a bankruptcy petition. You will have to maintain payments to other debts not included in the petition such as a secured loan. If you hold any assets such as stocks and shares or equity in a property then you will be likely to be asked to release that money to help repay your debts before going bankrupt.


There are also other restrictions, such as being banned from holding certain job roles at public offices. In some cases, you’ll need to make payments to your creditors for up to three years. You will also not be able to obtain credit over £500 without first notifying the lender that you are bankrupt.


Individual Voluntary Arrangement (IVA)

An IVA is a legally-binding agreement between you and your creditors for you to pay as much as you can afford towards your debts over a set time period, usually five years. As you must commit to making monthly payments, you’ll need to have a certain amount of disposable income.


An IVA is designed to deal with unsecured debts to several creditors, totalling more than around £8,000. It can only be set up and managed by a licensed Insolvency Practitioner (IP). If you make all your payments on time and comply with its terms, any outstanding debts will be written off when the IVA ends. You’ll also have legal protection from your creditors during the IVA.


Some of the key advantages over bankruptcy are:

  • You can usually keep your home and other essential assets such as a car
  • Your employment isn’t usually affected
  • Your IVA won’t appear in the papers, although it will be included on the Insolvency Register.

However, at least 75% of your creditors (by debt value) must approve the IVA for it to go ahead. You may need to re-mortgage or release equity from your home as part of the arrangement. You will also need to maintain your payments for the duration of the IVA arrangement (usually 5 years), otherwise the IVA could fail meaning you could be made bankrupt by your creditors.

Debt Relief Order (DRO)

You could qualify for a DRO if you have no money with which to repay your debts, don’t own your home and owe less than £15,000 in total. You must meet other criteria, too, such as having lived or worked in England or Wales in the last three years and not being involved in any other legal insolvency process.

DROs are overseen by the Insolvency Service. An application is submitted by an approved intermediary and considered by the Official Receiver (OR). If your DRO goes ahead, a ‘moratorium period’ will be placed on your debts, usually for 12 months. During this time, your creditors can’t pursue you, and interest and charges can’t be added to your debts.

If your circumstances haven’t improved after the moratorium period, all debts listed within your DRO will be written off. However, your creditors can apply to have your DRO and/or its restrictions (some of which are similar to those imposed by bankruptcy) extended. If things do improve during your DRO, it could be terminated and you may need to start repaying your debts. If this happens towards the end of the initial 12 months, the OR may give you a three month extension to reach a repayment agreement with your creditors.

Key features summary




Debt amount


Usually £8,000+

Less than £15,000

Debt type




Disposable income requirements

Little or none

Must be able to afford monthly payments

£50 a month or less

Asset restrictions to qualify

No restrictions

No restrictions

No assets worth over £300 or car over £1,000

Managed by

Official Receiver or a nominated Trustee

Insolvency Practitioner

Official Receiver

Upfront fees

At least £705 in court fees + our fees if we handle your bankruptcy

Fees are usually subsumed into monthly payments

Yes – £90 application / court fee

Usual duration

12 months

60 months

12 months

Possible extensions

Bankruptcy Restrictions usually last 3 years

May be extended if payments are missed, or if re-mortgage required and not possible

Can be extended by the Official Receiver or at request of creditors

Creditor repayments

Sometimes, may last for up to 3 years

Yes – mandatory monthly payments

Not permitted

Getting more credit

Restrictions apply

Restrictions apply

Restrictions apply

Affects bank account

Will usually be closed

May have to be closed

May have to be closed

Affects home ownership

Only if you own property with equity.

Not usually

Not applicable

Affects employment

Depends on profession

Not usually

Not usually

Affects business owners

Yes, rules/restrictions apply

Not usually

Yes, rules/restrictions apply

Affects public offices

Restrictions apply

Not usually

Restrictions apply

Affects credit rating

Yes, for at least 6 years

Yes, for at least 6 years

Yes, for at least 6 years

Details made public

Rarely published in local newspaper

Insolvency Register only

Insolvency Register only


What to do next

Your next step is to speak to a fully-qualified debt advisor about your circumstances to confirm which debt solutions options are open to you and to help you decide how to proceed.


Contact Bankruptcy Clinic today and we’ll put you in touch with a friendly and expert advisor at our partner firm, MoneySolve Ltd, who’ll help you start your journey to managing your debts and getting your life back on track.


  • Please note that this article is not intended to give debt advice. It’s still essential for you to consult a qualified debt advisor to discuss your situation in detail before deciding how to manage your debts.

Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.


Bankruptcy For You? Try Our Handy Checklist -

[…] To declare bankruptcy, you must owe at least £750 in unsecured debts. In reality, this figure is normally much higher, so if the amount you owe is relatively small, you may have other options open to you. For example, if you owe less than £15,000, have little or no disposable income and you’re not a homeowner, you might quality for a Debt Relief Order. […]

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