If you cannot repay what you owe, two formal options come up again and again: a Debt Relief Order (DRO) and an Individual Voluntary Arrangement (IVA). They sound similar. In practice, they suit very different situations.
This guide compares the two side by side, using the current rules for England and Wales. It explains who qualifies, what each one costs, and how each affects your credit file. It does not recommend either one — that decision needs free, personal debt advice, and we explain where to get it at the end.
The short version
A DRO is for people with relatively low debts, few assets and almost no spare income. It lasts 12 months, you make no monthly payments, and the debts are then written off.
An IVA is for people who can afford a regular monthly payment. It usually lasts five to six years. You pay what you can afford, and the remaining debt is written off at the end.
DRO vs IVA: side-by-side comparison
| Debt Relief Order (DRO) | IVA | |
|---|---|---|
| Debt level | £50,000 or less | No legal maximum; usually £10,000 or more in practice |
| Spare income | £75 a month or less after essential costs | Enough for a regular monthly payment |
| Assets | £2,000 or less in total; a vehicle worth up to £4,000 | No fixed asset cap |
| Homeowners | Not suitable — owning a home normally rules you out | Possible; you may be asked to release equity or extend the IVA by 12 months |
| Monthly payments | None | Yes, based on what you can afford |
| How long it lasts | 12 months | Usually 5–6 years |
| Cost to apply | Free (the £90 fee was scrapped in April 2024) | Fees are taken from your monthly payments |
| Who sets it up | An approved debt adviser only | A licensed Insolvency Practitioner |
| Credit file | Shown for 6 years | Shown for 6 years from the start date |
| Public record | Listed on the Individual Insolvency Register | Listed on the Individual Insolvency Register |
Who qualifies for a DRO?
The DRO rules are strict, because you pay nothing towards the debts. To qualify in England and Wales, you must owe £50,000 or less. (The limit was £30,000 until June 2024, so older pages you may find are out of date.) You must have £75 a month or less left after essential living costs. Your assets must be worth £2,000 or less in total, although a vehicle worth up to £4,000 is allowed on top of that.
You also must not own a home, and you cannot have had a DRO in the last six years. You apply through an approved debt adviser — you cannot apply directly. The adviser checks your figures and submits the application to the Insolvency Service. There is no application fee.
During the 12 months, your creditors cannot chase you for the debts in the DRO. If your situation has not improved when the year ends, the debts are written off.
Who qualifies for an IVA?
An IVA has no fixed debt ceiling and no asset cap. What matters is whether you can pay something every month. An Insolvency Practitioner works out an affordable payment from your income and essential spending. Your creditors then vote on the proposal. It becomes binding if creditors holding 75% of the debt value agree.
Your payments cover the practitioner’s fees and a contribution to your debts. If you own a home, the IVA normally protects it. However, near the end you may be asked to try to release some equity. If that is not possible, the IVA often extends by 12 months instead.
An IVA is a long commitment. If your income drops and the payments fail, the IVA can fail too, and you may be back where you started. That risk is a key difference from a DRO.
What both have in common
Both are formal, legal solutions, not informal arrangements. Both appear on your credit file for six years, which affects borrowing long after the debts themselves are gone. Both are listed on the public Individual Insolvency Register. And both cover most unsecured debts, such as credit cards, loans, overdrafts and arrears on household bills — but not every debt. Student loans, court fines and child maintenance arrears, for example, are not written off by either.
Scotland and Northern Ireland
The DRO and IVA described here apply to England and Wales. Northern Ireland has similar arrangements with its own rules and figures. Scotland is different: the equivalents include sequestration (bankruptcy), the Minimal Asset Process and Protected Trust Deeds. If you live in Scotland, start with advice from a Scottish service so you get the right options.
Be careful where you get advice
You will see many adverts from firms offering IVAs. Some of those firms earn their money from IVA fees. That means their advice may lean towards an IVA even when a DRO or another option fits you better. This is one reason the free advice services matter.
Free, impartial debt advice is available from MoneyHelper’s debt advice locator, StepChange and National Debtline. A debt adviser will check your full situation against every option, including ones nobody profits from. The Insolvency Service also publishes the official DRO rules on GOV.UK.
Two records, two clocks: the Insolvency Register and your credit file
Whichever option you choose, it leaves two separate records, and they run on two different clocks. Confusing them causes a lot of unnecessary panic afterwards.
The first is the Individual Insolvency Register, the public register run by the Insolvency Service. DROs, IVAs and bankruptcies all appear on it. Entries are normally removed around three months after the arrangement ends — after your DRO finishes, your IVA completes, or you are discharged from bankruptcy.
The second record is your credit file. The credit reference agencies keep a DRO, IVA or bankruptcy on your file for six years from the date it started, regardless of when it ended. So you can be fully discharged, off the register, and still have the entry on your credit file for years afterwards. That is normal, and it is not a sign that anything has gone wrong.
The practical point: when you finish, check both records. The register entry should disappear a few months after completion; the credit file entry runs its full six years, and lenders will see it until then.
The bottom line
The difference between a DRO and an IVA comes down to what you have. Very little income, few assets and debts under £50,000 point towards a DRO. A steady income you can commit for several years, or a home you need to protect, point towards an IVA. But these are pointers, not a verdict. Speak to a free debt adviser before you choose, because the wrong choice can cost you years.
Figures checked against Insolvency Service and GOV.UK guidance in November 2026. Rules differ in Scotland and Northern Ireland. This article is general information, not debt advice for your individual circumstances.
