Debt solutions across the UK: every formal and informal option

When debts have grown beyond what you can pay from your income, the options split into two broad families. Informal debt solutions involve reaching an agreement with the people you owe money to, and they are not legally binding¹. Formal debt solutions, introduced by the UK and Scottish governments, are legally binding arrangements, and many of them involve making payments for a set period before the rest of the debt is written off². The law defines a debt solution broadly, as any arrangement, scheme or procedure, statutory or not, whose aim is to pay, discharge or liquidate some or all of your debts³.

Which options are open to you depends first on where in the UK you live. England, Wales and Northern Ireland share most of the same solutions, including debt management plans, individual voluntary arrangements (IVAs), debt relief orders and bankruptcy, while Scotland has its own regime built around the Debt Arrangement Scheme, protected trust deeds and sequestration¹. The right choice also depends on how much you owe, what you own, whether your income allows any repayment at all, and whether your job or your home would be affected. This page sets out every option side by side so you can see what each one does before you speak to an adviser.

Formal and informal debt solutions: what each one does

The distinction between formal and informal runs through every option on this page, and it decides how much protection each one gives you. An informal solution is an agreement you reach with your creditors, usually through a debt management plan or a one-off arrangement, and it is not legally binding¹. Creditors can accept it, change their minds, or refuse to take part at all. A formal solution is created under rules set by government, and once it is in place it binds the creditors who are part of it: they cannot take further action against you to recover the debt, including taking you to court, while it lasts⁹.

Government approved formal solutions include debt relief orders (DROs), individual voluntary arrangements (IVAs) and bankruptcy¹⁰. Scotland's equivalents, covered below, are the Debt Arrangement Scheme, protected trust deeds and sequestration. Informal options are normally used for commercial credit debts, such as unsecured personal loans, credit cards, store cards, payday loans and overdrafts⁹.

Neither family is simply better than the other. Informal options are flexible, can be started and stopped, and do not put your name on a public insolvency register, but they offer no protection if a creditor refuses to play along. Formal options give real protection and, for insolvency solutions, can write off debt entirely, but they cost money to enter, restrict some activities, and stay on your credit file for years. The sections below take each option in turn.

Debt management plans: repaying in full at a lower monthly amount

A debt management plan (DMP) is an informal arrangement with the people you owe, in which you make one regular monthly payment, usually to a plan provider who divides it among your creditors¹¹. Starting a DMP means making a new promise to repay your debts in full: the debts are not written off, but the monthly amount is reduced and stretched over a longer period¹². Making one regular monthly payment can give you better control over your finances¹².

The strength and the weakness of a DMP come from the same place: it is not legally binding. Creditors may agree to freeze interest and charges, and may stop other action such as taking you to court, but they do not have to¹². A creditor can refuse to enter the plan and keep contacting you asking for immediate repayment, and even creditors who accept it can continue to contact you, ask for payment, or take you to court¹². A DMP is therefore best suited to someone who can afford to repay everything eventually and whose creditors are willing to cooperate.

In Scotland the position is different. A debt payment programme under the Debt Arrangement Scheme (DAS) is a formal, legally binding agreement, and creditors cannot take further action against you to recover the debt, including taking you to court¹³. It also lets you repay your debts over an extended period without the threat of creditor legal action¹. So the same idea, reduced payments over time, comes in an informal version in England, Wales and Northern Ireland and a binding version in Scotland.

A DMP tends to suit people with a steady income who can pay something each month, whose debts are mostly consumer credit, and who want to avoid the fees and restrictions of insolvency. It does not stop the debts being owed, and because repayments are stretched out, interest that is not frozen can keep building the total. The full guide to debt management plans covers how they work in detail, and freezing interest and charges explains when creditors agree to it.

Individual voluntary arrangements: part repayment, the rest written off

An individual voluntary arrangement (IVA) is an agreement between you and your creditors to pay all or part of your debts¹⁴. It is a formal, legally binding solution: once approved, it stops the people you owe from taking further action against you, and some of your debt is written off at the end¹⁵. An IVA usually sees you repay part of your debt during the term, with the remaining balance written off when the IVA ends⁶.

Approval depends on a vote. The IVA will be approved if the creditors who vote in favour make up at least 75% of the total debt included in the vote⁶. IVAs must be set up by an authorised debt specialist, known as an insolvency practitioner, and there are certain costs you need to pay¹⁶. The arrangement is typically based on the individual agreeing to repay a portion of their debts over a set period of time¹⁷. Sources differ on the typical length: some describe IVAs as running five to six years, others as five years (60 months), with a shorter option of up to 12 months if you are offering a single lump sum in full and final settlement.

Who an IVA suits depends on the numbers. Official guidance says unsecured debts generally need to be at least £15,000, though this depends on the individual creditors¹⁴, while some advisers say an IVA is not advised if your debts total less than £8,000⁹, and insolvency practitioners may quote minimums of £6,000 or £10,000. You also need to be able to pay back at least 10% of the total debt over the course of the arrangement¹⁸. An IVA therefore tends to suit someone with substantial unsecured debt, a reliable income that allows a monthly payment, and often assets such as a home they want to protect from bankruptcy.

The risks are real. If you do not keep up your monthly payments, your creditors can cancel the IVA, take further action against you, take you to court, or make you bankrupt¹⁴. If you consistently miss payments without contacting your insolvency practitioner, the IVA will fail and you may be left with bankruptcy as the only realistic option¹⁹. The dedicated guide to IVAs goes further, and what happens if you miss IVA payments covers the failure process.

Debt relief orders: free to apply, for low income and few assets

A debt relief order (DRO) is a statutory solution designed for individuals with low value debts, low incomes and few assets, as an alternative to bankruptcy where their financial circumstances have little prospect of improving¹⁷. It is free to apply⁵, which sets it apart from every other insolvency route. At the end of the DRO period, you are released from your debts.

The eligibility rules are strict. When DROs were introduced, applicants had to be unable to pay their debts, have unsecured debts of less than £15,000, assets of less than £300, and surplus income of less than £50 per month, be domiciled in England or Wales or resident or carrying on business there for the last three years, and have no existing bankruptcy order, bankruptcy restrictions order, IVA or DRO in the last six years⁷. Northern Ireland has its own DRO legislation, and its rules similarly require that the individual is unable to pay their debts before an order can be made in respect of their qualifying debts²⁰. Being a homeowner is one of the reasons a DRO is not available²¹.

A DRO also carries restrictions while it lasts. You must not act as a company director, or set up a limited company, without consent from a court²². You can, however, remain self-employed as a sole trader or in a partnership⁵. If the official receiver considers you have been dishonest or otherwise at fault, a debt relief restrictions order can be made against you by the High Court, extending the restrictions²⁰.

DROs are heavily used. Official statistics for England and Wales recorded 3,879 DROs in June 2026²³, 3,880 in August 2026²⁴, and 3,985 in September 2025²⁵, making them consistently more common than bankruptcies in each of those months. A DRO tends to suit someone with no realistic prospect of their circumstances improving, very few assets, and little or nothing to pay each month. The full guide to debt relief orders explains the process, and debts that cannot go into a DRO lists the exclusions.

Bankruptcy costs £680 in England and Wales

Bankruptcy is a formal method of dealing with debt if all other repayment options have failed¹. In England and Wales, the fee is £680: you pay a total of £680, made up of a £130 adjudicator fee and a £550 bankruptcy deposit⁴. Independent guidance confirms it costs £680 to declare yourself bankrupt²⁶.

What bankruptcy does is write off unsecured debts if you cannot afford to repay them, but at the cost of your assets: any assets you own, like your home, can be sold to pay off your debts²⁷. Insolvency solutions generally can write off some or all of your debts²⁸, and bankruptcy is the most complete version of that, but also the most drastic. It is a court process, and in Scotland the courts handle petitions for sequestration from creditors or trustees²⁹.

Bankruptcy is not as common as the other insolvency routes. Official statistics for England and Wales recorded 674 bankruptcies in June 2026 alongside 3,879 DROs and 7,318 IVAs²³; in August 2026 there were 725 bankruptcies, 3,880 DROs and 7,039 IVAs²⁴; and in September 2025 there were 622 bankruptcies, 3,985 DROs and 6,494 IVAs²⁵. IVAs and DROs together account for the large majority of individual insolvencies.

Bankruptcy tends to suit someone whose debts are beyond any repayment plan, who has few assets to lose, and for whom the certainty of a fresh start outweighs the restrictions. It does carry restrictions on credit and on certain roles, covered below, and it stays on your credit file for six years³⁰. The full guide to bankruptcy in England and Wales covers the process, and bankruptcy in Northern Ireland covers the separate rules there.

Debt solutions in Scotland: trust deeds and sequestration

In Scotland, solutions include an informal agreement, the Debt Arrangement Scheme (DAS), a protected trust deed or bankruptcy¹. The Scottish system runs on different names and different rules from the rest of the UK, so a reader in Scotland should check that any advice they receive applies north of the border.

The Debt Arrangement Scheme is Scotland's formal repayment route. A debt payment programme under DAS is a formal, legally binding agreement in which creditors cannot take further action against you to recover the debt, including taking you to court¹³, and it lets you repay your debts over an extended period without the threat of creditor legal action¹. Unlike insolvency solutions, you keep your assets: assets are valuable items such as savings, vehicles and your home¹³. Scottish government guidance notes that you need to get advice from an approved money adviser first before you can apply³¹.

A protected trust deed is Scotland's equivalent of an IVA: a similar solution to an IVA, but with different benefits, risks and fees¹⁵. A trust deed or debt payment plan in Scotland can stop interest and charges³². Sequestration is the Scottish form of bankruptcy²⁸ and writes off unsecured debts if you cannot afford to repay them³³. In Scotland, sequestration or MAP bankruptcy are similar solutions, but have different benefits, risks and fees associated with them⁴. Sources disagree on the sequestration fee, with one giving £150 and another £200, so check the current fee with an adviser before applying.

The Scottish Government has been reviewing the whole regime: its Stage Three Review final report, published in March 2026, covers the future of statutory debt solutions and the personal insolvency regime in Scotland³⁴. The dedicated pages on protected trust deeds, sequestration and the Minimal Asset Process, and the Debt Arrangement Scheme cover each in detail.

Fees and costs of each debt solution

Every solution has a cost, and it is not always obvious who pays it. You may have to pay a fee or monthly payments under insolvency solutions³³. For bankruptcy in England and Wales the cost is explicit: £680 in total, a £130 adjudicator fee plus a £550 bankruptcy deposit⁴. A DRO is free to apply⁵. An IVA must be set up by an authorised debt specialist and there are certain costs you need to pay¹⁶, and those fees come out of the money you pay in: if your IVA fails, you are back to square one having paid fees³⁵.

The wider cost of debt problems is easy to underestimate. A study cited in legislation estimated costs associated with debt problems at in excess of £1,000 per individual³⁶. Fee-charging companies advertise many different debt solutions, such as DMPs, IVAs, bankruptcy, DROs and loan consolidation³⁷, and the same solutions are available free through charities and public bodies, so paying a fee buys no better outcome. The comparison of free debt charities and fee-charging companies explains the differences, and what debt solutions cost breaks down every fee.

What happens to your home, car and belongings

What you own is the single biggest difference between the solutions. Under bankruptcy, any assets you own, like your home, can be sold to pay off your debts²⁷. Under a Scottish debt payment programme, you keep your assets, including savings, vehicles and your home¹³. A DRO is only available to people with assets of less than £300, and not to homeowners at all⁷. An IVA sits in between: your home is not automatically sold, but the arrangement can include provisions dealing with equity, and the guide to home equity in an IVA explains the remortgage rule.

Before choosing any solution, there are questions worth asking about every one of them: how long it will last, whether it affects your employment, whether it affects your credit rating, whether it is legally binding on all creditors, whether it prevents creditors taking further action, whether your home is at risk, and whether you have to pay a fee³⁷. Employment matters more than many people expect: bankruptcy restricts certain roles, and a DRO stops you acting as a company director or setting up a limited company without a court's consent²², while allowing you to remain self-employed as a sole trader or in a partnership⁵.

It also matters what kind of debt you are dealing with. With bank debts such as overdrafts, you might not lose your home for not paying, but you can still be taken to court and ordered to pay what you owe, often with extra costs on top³⁸. Secured debts, such as mortgages, are treated differently from unsecured ones in every solution, and arrears on your home carry their own risks: see rent arrears, council tax arrears and help for homeowners.

Credit file and Insolvency Register: six years on your file

Every debt solution leaves a mark, and the length of that mark is remarkably consistent. Some information stays on your credit file for six years, like missed payments, defaults and court judgments⁸. Accounts appear on your credit file for six years from when they default³⁰. Insolvencies, including bankruptcy, debt relief orders, IVAs and protected trust deeds, stay on your file for six years from the date they are recorded⁸. Settlements, where you pay off a debt in full or reach a partial settlement, also stay for six years from the date they are recorded⁸. A default will stay on the consumer's credit file for six years³⁹. Details of each debt option can be recorded on your credit file for up to six years⁹.

The debts then drop off your credit file after six years³⁰. IVAs remain on someone's credit history for six years, while details are also included on the Individual Insolvency Register⁴⁰, the public record of insolvencies. Formal solutions therefore involve a public record as well as a credit record, which informal arrangements do not.

Six years is a long time, but it is not permanent, and the entries relate to the date of the record, not the date you finish paying. A debt management plan, being informal, does not create an insolvency record, though the underlying missed payments and defaults still appear for six years⁸. The guide to credit scores and credit reports explains how lenders use this information, and how debt affects a credit file covers the detail.

Where to get free debt advice before you apply

No solution on this page should be entered without advice first. In Scotland, you need to get advice from an approved money adviser before you can apply for a statutory solution³¹. In Northern Ireland, official guidance is to get advice before setting up a debt management plan, and free and independent advice is available from organisations like Advice NI¹². The same applies to informal arrangements: you can get free and independent advice about them, and whether they are the best way to deal with your debt problem, from organisations like Advice NI⁴¹.

Free debt advice is available from StepChange, Which? and Citizens Advice, among others⁹. A debt adviser will go through your income, assets and debts with you, work out what you can actually afford using a standard financial statement, and identify which solutions you qualify for. They will also check things this page cannot: whether any of your debts are statute-barred, which debts are priority debts, and whether Breathing Space, the 60-day protection from creditor action, would give you time to decide.

The place to start is the guide to free debt advice, which lists the main charities and public services and explains what happens in an advice session. If things go wrong after a solution is in place, the Financial Ombudsman Service can consider complaints about creditors, and complaints about insolvency practitioners have their own route, covered in complaining about an insolvency practitioner.