An IVA is only available to residents in England, Wales and NI

If you’re just beginning to explore debt solutions, it’s completely understandable if you’re feeling a little overwhelmed. Unless you’re an expert, it can be tricky trying to work out the differences between each debt solution and decide which is the best option for you.

Lots of people who get in touch with us want to know whether an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO) is the right choice for them. With this in mind, we’ve decided to compare the two ways of managing your debts – so you can understand the differences and think about which one might be right for you.

Why choose IVA Plan?

  • Write off unsecured debts over £7,000
  • Stop interest and charges soaring
  • Reduced payments from £100 per month

What are Debt Relief Orders and Individual Voluntary Arrangements?

We’ll explore the exact details of what makes Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs) different a little further on in this guide, but it’s useful to get a quick overview.

An IVA is a debt solution that’s meant for someone who can afford a payment of at least £100 a month towards the debts that they owe. A DRO is a way of dealing with debts that are designed for people who can’t afford to pay this much – and have less than £75 of disposable income available to pay towards their debts each month.

At a glance, the debt solution that’s the right fit for your budget will probably be the one that a debt management company will explore with you first.

Whichever plan looks the best, it’s important to remember that a DRO and an IVA come with different pros and cons. As such, we’ve put together some more information that’ll help you think about which of these options could be the right way for you to handle your debt.

Comparing an IVA with a Debt Relief Order (DRO)

Whether an IVA or DRO is going to be better for you will come down to your unique financial situation – as both debt solutions are designed for different circumstances and different levels of disposable income. Let’s compare a DRO and an IVA, answering some important questions about each:

How long does each debt solution last?

DRO: A DRO lasts for one year.

IVA: An IVA usually lasts for five or six years.

What do you need to qualify?

DRO: To qualify for a DRO, you must owe £30,000 or less. A Debt Relief Order is only available if you are not a homeowner, and things you own (your assets) are worth less than £2,000 in total. Also, you must not have had a debt relief order in the last six years.

You will only be eligible for a DRO if you have less than £75 spare income leftover after your tax, national insurance, and household running costs are paid.

IVA: To be eligible for an IVA, you must owe at least £6,000 to more than one ‘creditor’ (company or individual you’re in debt to). You must also have a regular, stable income.

Which debts can be included?

DRO: A DRO can include missed payments (arrears) on your household bills (things like gas and electric, rent payments, and council tax). Also, a Debt Relief Order can also include ‘unsecured’ debts – like credit cards, personal loans, overdrafts, payday loans, and money that you owe to friends or family.

IVA: Like a DRO, an IVA can include the same kinds of missed debts – like missed payments on your household bills – along with any other unsecured debts, like credit cards, overdrafts, loans, and debt that’s owed to family or friends.

Which debts can’t be included?

DRO: A DRO is designed for unsecured debts, so it cannot include mortgage payments or secured loans. Also, it cannot include hire purchase (HP) agreements, missed TV licence payments, court fines, student loans, child support back payments, or social fund loans.

IVA: An IVA cannot include court fines, TV license arrears, missed child support payments, or social fund loans.

What happens to interest and charges?

DRO: When you apply for a Debt Relief Order, the companies you owe money to will be asked to freeze any interest or additional charges.

IVA: When you’re applying for an Individual Voluntary Arrangement, your creditors will stop charging you interest or any additional fees.

Are they legally binding?

DRO: Yes. A DRO is legally binding – which means both you and your creditors must stick to the agreement.

IVA: Like a DRO, an IVA is legally binding – so you and the companies you owe must stick to the agreement.

What happens to the things you own?

DRO: You will only be eligible for a DRO if your assets (the things you own) are worth £2,000 or less. This includes your car.

IVA: Normally, the things you own will be protected with an IVA. If there’s any chance that your home or assets will not be protected, your Insolvency Practitioner might help you look at other ways of dealing with your debts.

What happens to the debts that are outstanding?

DRO: With a UK Debt Relief Order, your debt is completely wiped at the end of the 12-months. There is no need to pay a monthly payment towards these debts.

IVA: At the end of the arrangement, any remaining debt is written off and your creditors will consider the matter finished.

Do you have to talk to the people you own money to?

DRO: No. The people you owe money to (creditors) will not be able to contact you. Instead, they will have to talk to the Insolvency Practitioner (IP) dealing with your case.

IVA: No. Your creditors will not be allowed to contact you. Again, they will have to talk to your IP if they need to discuss the debt during the six years that the arrangement is in force.

What happens if you forget about some of your debts?

DRO: If you miss any debts when a DRO is set up, the law says you cannot add them later. Instead, you’ll have to make separate arrangements to pay them off.

IVA: It’s rare to miss debts when the arrangement is set up – but if you do, your IP can usually add them later; as long as they’re less than 10% of the overall amount you owe.

Will my job be affected?

DRO: Like bankruptcy, you cannot be a company director of a limited company or hold certain official positions or roles if you’ve got a Debt Relief Order in place.

IVA: With an IVA, you can still hold a position as a company director (which is not possible with debt relief orders or bankruptcy). However, you may need to declare your arrangement to your employer; as some professions will not allow you to keep your position if you’re seen to be in financial difficulties.

What happens to my credit rating?

DRO: Your order will be recorded on your credit file and your credit score will go down – as lenders will consider you to be a serious risk. However, when your Debt Relief Order is complete, you’ll be able to start rebuilding your score. Your DRO will be recorded on your credit score when it’s set up and will stay there for six years.

IVA: A UK Individual Voluntary Arrangement will also damage your credit rating – but even though it runs for six years, it’s recorded on your credit report when it’s set up; so by the time it is complete, it will disappear from your credit ratings and you’ll be able to obtain credit and rebuild your score.

Here's an example of how we can help.

Let's say you owe...

Bank Loans £5,366.00
Gas Bills £129
Pay Day Loan £1,989.00
Overdraft £1,234.68
Debt Collection Agency £380.16
Short Term Loan £243.88
Council Debt £1,009.24
Credit Card £8,433.00

Total amount owed: £19,256.57

Customer monthly repayments before and after an IVA.

Example case completed in 2023. Repayment calculated using income and expenditure data. Monthly payments and write off percentages are based on individual circumstances.

Check if you qualify

Pros and Cons of DROs and IVAs

As you can see, although each solution is designed to help you become debt-free, there are some differences – and because each is a form of ‘insolvency’ – they have certain advantages and disadvantages, depending on your situation.

To give you an overview, we’ve listed the main pros and cons of each:

IVA Advantages

  • You only need to make one affordable monthly payment
  • Your interest and charges will be frozen
  • Your creditors will not be able to contact you
  • There’s no fee to pay before the IVA is set up
  • You’ll normally be able to keep your home
  • You may be able to take on new credit during your IVA – but only if it’s essential and approved by your IP
  • The costs of an IVA are rolled into your affordable monthly payment
  • At the end of the term, any remaining debt is written off

IVA Disadvantages

  • If you can’t or don’t keep up with your repayments, your IVA could fail and you’ll be responsible for the debt again
  • Your credit rating will be damaged for 6 years
  • If your IVA fails, the companies you owe money to could try to make you bankrupt
  • Your spending and access to credit will be limited
  • Although it’s unlikely to be seen by anyone, your name will be recorded on a public register

DRO Advantages

  • The companies and people you owe money to can’t take any further action without getting permission from the court first
  • All debt repayments and interest will be frozen for 12 months
  • If a monthly repayment is possible, it will be worked out between you, the IP that’s providing debt advice, and the companies you owe money to. It will always be an affordable amount but could be zero.
  • If your financial situation is the same at the end of the 12 months, your debts will be written off
  • A DRO is seen as a better and more affordable option than bankruptcy

DRO Disadvantages

  • If you don’t stick to your agreements and cooperate with your debt advisor for the year, your DRO could be taken away and you could find yourself back to square one
  • You won’t be able to take out any credit of more than £500 during the time of your DRO. If you do, you’ll be committing an offence
  • Your credit rating will be damaged for 6 years – until the record of the DRO is wiped from your credit record
  • Your DRO will be put on a public insolvency register – although it’s unlikely anyone would see it
  • You need to pay a non-refundable one-off payment of £90 to apply for a DRO – even if it’s not successful

Should I choose an IVA or DRO?

Whether you’re thinking about going for an Individual Voluntary Arrangement (IVA) or possibly a Debt Relief Order (DRO) application, you’ll need to talk to an Insolvency Practitioner for professional debt advice that will help you decide which is right for you.


Well, it’s because both are officially known as ‘formal debt solutions’ – which means they have to be officially set up by professionals who are authorised by the Financial Conduct Authority to help people who would like money advice.

They also understand the legal side of what’s involved and can put the necessary paperwork and agreements into place.

Insolvency Practitioners are also there to help people choose the solution that’s right for them. This will be based on how much disposable income they have free, debt that’s owed, the assets (possessions) they own – and much more.

As such, your best option is to get this kind of debt help as quickly as possible.

The sooner you do, the more options you’re likely to have when it comes to avoiding bankruptcy and becoming debt-free as quickly as possible.

You could write off up to 81% of your unsecured debt today