A Debt Relief Order writes off qualifying debts after 12 months and costs nothing. It is for people with under £50,000 of debt, less than £75 a month spare, under £2,000 in assets and no property. An IVA is a repayment plan run by a licensed insolvency practitioner, usually for five to six years, with fees taken from your payments.

If you meet the DRO tests, an IVA is very unlikely to be the better option. If a surplus income or a home rules out a DRO, an IVA may be worth considering. Only an approved debt adviser can assess DRO eligibility.

DRO and IVA: the main differences

One route asks you to pay nothing for a year. The other asks you to pay for several years.

DRO and IVA compared. DRO figures reflect GOV.UK guidance updated 28 June 2024; IVA features are typical.
Feature Debt Relief Order IVA
Nature A write-off: no payments towards included debts A repayment plan with the balance written off at the end
Who runs it The Official Receiver; applied for by an approved intermediary A licensed insolvency practitioner
Eligibility Debts under £50,000, spare income under £75 a month, assets under £2,000, no property A sustainable surplus income; creditors holding 75% of voting debt must approve
Cost Free; the fee was abolished on 6 April 2024 Practitioner's fees, taken from your monthly payments
Length 12 months Typically 5 years, often 6 if home equity cannot be released
Your home Must not own or have an interest in property Usually kept; equity may need releasing in the final year
Debt written off All included debts, in full, after 12 months Whatever remains after payments and fees
If it fails Revoked; the debts return, no fees lost Debts return minus what reached creditors; bankruptcy may follow
Credit file 6 years from approval 6 years from the start
Public register Until 3 months after the DRO ends For the length of the arrangement

How each one works

A DRO is decided by the Official Receiver against fixed criteria. An approved debt adviser checks that you meet them and applies for you. Creditors can object but do not vote. For 12 months you make no payments on included debts, interest is frozen and enforcement stops. Our guide on how a DRO works covers each stage.

An IVA starts with a proposal from an insolvency practitioner setting out what you can pay each month. It only goes ahead if creditors holding 75% of the voting debt by value agree. Once approved it binds every creditor included. You pay the agreed amount, usually for five years, and the practitioner distributes it after taking fees.

Who each one suits

A DRO exists for people with nothing meaningful to offer creditors. The £75 spare income test is the practical line between the two. If you cannot pass it, an IVA is unlikely to be affordable.

An IVA suits someone with a reliable surplus well above £75 a month, or someone whose debts, assets or home rule out a DRO. Creditors accept it because part of the debt over five years beats losing almost all of it in bankruptcy.

How much does each one cost?

A DRO costs nothing at any stage. The fee was abolished on 6 April 2024 and advice from an approved intermediary is free. See Debt Relief Order costs for the indirect costs to plan for.

An IVA is a commercial service. The practitioner's fees are paid out of your contributions, so in the early months much of what you pay may go to fees rather than the debt. The fees are set out in the proposal and are not refunded if the IVA fails.

What happens to your home

Any interest in a property rules out a DRO, including a joint share, a mortgaged home or a property abroad. For a homeowner who cannot repay, an IVA is often the formal route that lets them stay put. Expect to release equity towards the end, usually by remortgaging, or to pay for an extra year if that proves impossible. See DRO and homeownership.

What gets written off, and what happens if it fails

A DRO writes off every included qualifying debt in full after 12 months, as long as the order is not revoked. An IVA writes off whatever is left when the arrangement completes. Excluded debts such as student loans remain payable in both.

If a DRO is revoked

The Official Receiver can revoke a DRO if you no longer qualify, for example after a windfall, or if you gave inaccurate information. The debts come back, but you have lost nothing in fees. See what happens if your circumstances change.

If an IVA fails

Missed payments can cause an IVA to fail. You are left with the original debts minus whatever reached creditors, and the practitioner may petition for your bankruptcy, which carries its own £680 fee.

A DRO is usually right when

  • You meet every DRO criterion.
  • Your circumstances are unlikely to improve within the year.
  • You want a free solution with a known end date.
  • You could not sustain payments for five or six years.

An IVA may be worth considering when

  • You have a reliable surplus well above £75 a month.
  • You own your home and want to avoid it being sold.
  • Your debts or assets exceed the DRO limits.
  • Bankruptcy would affect your job.

Beware of IVA sales tactics

IVAs generate fees and DROs do not. That gives some lead-generation websites a reason to push an IVA even when a DRO would be free and faster.

Warning signs

Be wary of adverts that promise to "write off up to 80% of your debt", ask for your details before explaining anything, or never mention a Debt Relief Order. They are a sign to stop and get independent advice.

None of this means IVAs are bad. The problem is the mismatch. Someone with £15,000 of debt, no property and £40 a month spare should not pay fees for five years when a free 12-month DRO would end the matter. Citizens Advice, StepChange and National Debtline are free and must consider every option. Our guide to finding free debt advice explains how to reach them.

Which should you choose?

Start with the DRO tests. If you pass them all, a DRO is almost always the better choice, because it costs nothing, ends in a year and writes off the included debts in full. If a surplus income, a home or debts over £50,000 rule you out, an IVA may be the right formal route, provided the payments are realistic.

Being in one rules out the other for as long as it lasts. Both appear on the Individual Insolvency Register and stay on your credit file for six years, as our credit score guide explains.

Unsure whether you would pass the DRO tests? The checker stores nothing.

Use the eligibility checker

Before you rely on this page

Debt Relief Order is an independent educational website. We are not the Insolvency Service or an insolvency practitioner, and we do not provide regulated debt advice. IVA terms vary. Always confirm your position with an approved debt adviser before choosing a solution.

Sources and further reading