IVA vs DMP vs DRO: UK Debt Solutions Compared

In England and Wales, three of the most commonly encountered debt solutions for individuals are the Individual Voluntary Arrangement (IVA), the Debt Management Plan (DMP), and the Debt Relief Order (DRO). Each operates under a different legal framework, carries different eligibility criteria, and produces different outcomes. Two of these — the IVA and the DRO — are formal insolvency procedures established in statute. The third — the DMP — is an informal, non-statutory arrangement between a debtor and their creditors.

This article explains how each of these three systems works, the rules and thresholds that govern them, and how they differ from one another. It is intended as factual reference material. It does not constitute financial advice, and it does not assess which solution may be appropriate for any individual's circumstances.

The information in this article applies to England and Wales unless otherwise stated. DROs are also available in Northern Ireland under similar criteria. Scotland operates its own separate system, including the Minimal Assets Process (MAP) for lower-value debts. DMPs are available throughout the United Kingdom.

An IVA is a legally binding agreement between a debtor and their creditors, administered by a licensed insolvency practitioner. If approved by 75% of voting creditors (by value of debt), it binds all creditors. The debtor makes regular payments, typically over 60 or 72 months. Remaining qualifying debt is written off upon completion.

A DRO is an administrative insolvency procedure for people with relatively low levels of debt, limited assets, and low surplus income. It provides a 12-month moratorium during which qualifying debts are frozen and no payments are required. At the end of the moratorium, qualifying debts are discharged. There is no application fee.

A DMP is an informal, non-legally-binding arrangement through which a debtor repays non-priority unsecured debts at a reduced, affordable rate. Creditors are not legally required to accept the terms. DMPs offer no statutory protection from creditor action.

IVAs and DROs are recorded on credit files as insolvency events; DMPs are reflected through defaults and payment arrangement markers rather than a single entry. In most cases, this information remains on credit files for six years.

Individual Voluntary Arrangement (IVA)

An IVA is a statutory insolvency procedure governed by Part VIII (sections 252–263) of the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016 (rules 5.1–5.38). It is a formal, legally binding agreement between a consumer and their creditors.

The process begins with an insolvency practitioner (referred to as the "Nominee") preparing a proposal on the debtor's behalf, which includes a financial assessment and proposed repayment terms. The Nominee must submit a report to the court confirming whether the proposal has a reasonable prospect of being approved. A creditors' meeting is then arranged — typically within two to four weeks of proposal submission, according to published guidance — at which creditors vote on whether to accept the proposal. Approval requires support from 75% by value of voting creditors. Creditors often vote by correspondence rather than attending in person.

Once approved, the IVA becomes binding on all unsecured creditors, including those who voted against it. The debtor then makes regular monthly payments to the insolvency practitioner (now acting as the "Supervisor"), who distributes funds to creditors after deducting fees. Under the IVA Protocol 2025, the standard supervision period is 60 months, or 72 months where the debtor has home equity of £10,000 or more. Under the IVA Protocol, equity is assessed at the review stage using an 85% valuation of the property, less secured borrowing.

The IVA Protocol 2025 is a voluntary standard framework widely adopted by insolvency practitioners and creditors. It does not override statutory requirements. The family home is excluded from realisation under the Protocol; instead, the term is extended for those with equity above the threshold. Upon completion, a certificate of completion is issued within 28 days — a requirement introduced by the 2025 Protocol.

Insolvency practitioners are regulated by Recognised Professional Bodies (RPBs). The rights of secured creditors cannot be affected by an IVA without their consent — mortgages and secured loans remain entirely outside the arrangement.

Debt Relief Order (DRO)

A DRO is a formal debt solution under Part 7A of the Insolvency Act 1986 (sections 251A–251X), introduced by the Tribunals, Courts and Enforcement Act 2007. It is administered by the Insolvency Service through approved intermediaries — that is, authorised debt advisers — rather than through the courts.

The process is initiated by applying through an approved intermediary, who completes the online application and submits it to the Insolvency Service. The intermediary cannot charge a fee for this service. The Official Receiver then determines the application. Published guidance states this usually happens within a few working days, though no statutory timeframe is specified.

Once a DRO is granted, a 12-month moratorium period begins. During this period, qualifying debts are frozen and creditors cannot take recovery action. No payments towards qualifying debts are required. At the end of the moratorium, qualifying debts are written off (discharged), provided the debtor's circumstances have not materially improved. The moratorium may be extended by up to three months where investigation or revocation is being considered.

As of 6 April 2024, there is no application fee for a DRO. The previous £90 fee was abolished following the Spring Budget 2024 announcement. Refunds may be available where the fee was paid but the application was not submitted, subject to Insolvency Service criteria.

Debt Management Plan (DMP)

A DMP is an informal, non-statutory agreement between a debtor and their creditors to repay non-priority debts at a reduced, affordable rate. It is not an insolvency procedure and is not governed by specific insolvency legislation.

DMPs are administered either by FCA-regulated commercial debt management firms or by free debt advice charities. Commercial providers are regulated by the Financial Conduct Authority (FCA) under the Consumer Credit Act 1974 and the FCA Handbook (CONC 8 — Debt counselling and debt adjusting). FCA rules require firms to signpost free advice, provide pre-contractual information, and ensure fee structures do not result in customers paying substantially all fees before creditor repayments begin.

The process typically begins with a financial assessment and budget preparation using the Common Financial Statement or equivalent recognised guidelines. According to the Debt Management Plan Protocol (an industry voluntary framework), providers are expected to inform creditors within 10 working days of appointment. The plan then continues with ongoing monthly payments and annual reviews. The Protocol states that reviews should take place within the first 12 months and at least annually thereafter.

DMPs are not legally binding. A debtor can cancel a DMP at any time without legal consequences. Equally, creditors are not legally required to freeze interest or charges, though in practice many do if regular payments are maintained.

IVA

• The IVA Protocol 2025 includes a £7,000 minimum debt guidance level for Protocol IVAs, rather than a statutory minimum. IVAs where debts total less than £7,000 require a clear explanation of suitability in the proposal. Bespoke (non-Protocol) IVAs may have different thresholds.
• The Protocol states that suitable IVA candidates will, in most cases, have regular sustainable income other than State benefits or State pension. IVAs for individuals primarily reliant on benefit income may still be possible, but require additional justification.
• The standard Protocol IVA term is 60 months. Where the debtor has home equity of £10,000 or more (assessed under the Protocol at the review stage using an 85% valuation of the property, less secured borrowing), the term extends to 72 months. The Protocol applies from 31 March 2025, with mandatory adoption from 1 July 2025.
• Consumers who meet the criteria for a DRO are stated by the Protocol to be unlikely to be suitable for a Protocol IVA.

DRO

To be eligible for a DRO, a debtor must satisfy all of the following criteria simultaneously:

1. Qualifying debts must not exceed £50,000. This threshold was increased from £30,000 on 28 June 2024; applications submitted before that date were subject to the lower limit.
2. Total assets must not exceed £2,000, excluding basic household items and tools of trade.
3. Any vehicle owned must be worth less than £4,000 at current sale value. This was increased from £2,000 on 28 June 2024. Vehicles adapted for physical disability are exempt from this cap. Only one vehicle can be excluded.
4. Monthly surplus income (after usual household expenses) must be £75 or less.
5. The debtor must not be a homeowner, even if the property is in negative equity.
6. The debtor must have lived or worked in England or Wales within the last three years.
7. The debtor must not be currently bankrupt, subject to an interim order, or in an IVA.
8. The debtor must not have had a DRO in the last six years, unless the previous DRO was revoked.

DMP

DMPs have no statutory eligibility thresholds. Some advice bodies have historically suggested token payments (for example £1–£5 per month to each debt), but this is guidance rather than a rule, and commercial providers may apply different minimums. The Debt Management Plan Protocol states that DMPs should only be offered if projected to repay debts within 10 years, or where there is potential for improved circumstances. Exceptional circumstances may justify longer plans.

A debtor entering a DMP is expected to have a budget surplus after essential expenses — that is, enough to make some payment towards debts, but less than the contractual payment amounts originally agreed.

"Are all three solutions legally binding?"

No. An IVA, once approved, is legally binding on both the debtor and all unsecured creditors — including those who voted against it. A DRO provides statutory protection through the moratorium, during which creditors cannot take recovery action. A DMP is not legally binding on anyone. A debtor can walk away from a DMP at any time, and creditors remain free to take action.

"Do creditors have to freeze interest during a DMP?"

No. Creditors are not legally required to freeze interest or charges during a DMP. In practice, many creditors do choose to freeze interest where regular payments are maintained, but this is voluntary. No verified percentage is available for how many creditors do so.

"Is a DRO free?"

Yes. Since 6 April 2024, there has been no application fee for a DRO. The previous £90 fee was abolished. Refunds may be available where the fee was paid but the application was not submitted, subject to Insolvency Service criteria.

"Can creditors still chase me during a DMP?"

Yes. Because a DMP is informal and non-statutory, creditors retain the right to take legal action. This can include issuing default notices, obtaining County Court Judgments (CCJs), or instructing bailiffs.

"What happens to my home in an IVA?"

Under the IVA Protocol 2025, the family home is excluded from realisation. However, if equity of £10,000 or more is identified at the review stage (using the Protocol's 85% valuation, less secured borrowing), the IVA term extends from 60 months to 72 months. Mortgages and secured loans are not affected by the IVA; they remain outside the arrangement entirely.

"How long does each solution appear on my credit file?"

According to published guidance from credit reference agencies and major debt advice organisations, IVAs and DROs are recorded on credit files as insolvency events. DMPs are reflected through defaults and payment arrangement markers rather than a single entry. In most cases, this information remains on credit files for a period of six years. IVAs and DROs are also recorded on the Individual Insolvency Register — DROs for 15 months total (12-month moratorium plus 3 months) and IVAs for the duration of the arrangement plus 3 months. DMPs are not insolvency procedures and do not appear on the Insolvency Register.

IVA Exceptions

• Secured creditors' rights cannot be affected by an IVA without their express consent. Mortgages and secured loans remain outside the arrangement. Secured creditors may still enforce their security if payments are not maintained.
• Debts incurred through fraud may be included in an IVA, but discharge does not prevent criminal proceedings or recovery where statute excludes discharge.
• If an IVA fails — for example, due to missed payments — creditors may ask the Supervisor to petition for bankruptcy. Published guidance suggests this outcome is rare but possible.

DRO Exceptions

• Fraud-related debts are qualifying debts and are discharged at the end of the moratorium, but criminal liability and statutory recovery powers (such as benefit recovery) may continue. Deductions from benefits for fraudulent overpayments must stop during the moratorium but may resume afterwards.
• Secured debts are not qualifying debts. Creditors with security — including hire purchase agreements and logbook loans — can still enforce their security and repossess goods during a DRO if payments are not maintained.
• Joint debts can be included in a DRO, but the other joint debtor remains fully liable for the debt. The DRO protects only the named debtor. A guarantor can also still be pursued for the full amount.
• According to published guidance, rent arrears are qualifying debts in a DRO. Landlords cannot obtain court orders for repayment of included rent arrears, but they may still seek outright possession orders or suspended possession orders for future rent and costs. Section 21 notices can still be issued. This may vary depending on the specific circumstances.
• A DRO prevents enforcement of the underlying debt, but goods already under a Controlled Goods Agreement (CGA) with bailiffs may still be removed in certain circumstances. The debtor should be aware that a DRO does not automatically release goods already taken into control.

DMP Exceptions

• DMPs are designed for non-priority unsecured debts only. Priority debts — including mortgage or rent arrears, council tax, court fines, and in some cases utility debts — must be dealt with separately and are not covered by a DMP.
• A debtor can cancel a DMP at any time without legal consequences, as it is an informal arrangement.

The three debt solutions described in this article operate at different levels of formality and carry different consequences.

• An IVA is a substantial legal commitment. Once approved, it binds all unsecured creditors and the debtor alike for the duration of the arrangement — typically five or six years. Fees are deducted from monthly payments, not paid upfront. In most cases, nominee fees are typically in the range of £1,650 to £2,000, with supervisor fees of around 15–20% of payments, though these figures vary by provider and must be approved by creditors. Some providers operate on a non-profit basis. No legal aid is available for IVAs. The IVA provides legal certainty but requires sustained, regular income over the full term.
• A DRO is designed for those with limited means. It requires no fee, no payments, and no court appearance. The qualifying criteria are specific and strict — the debtor must not be a homeowner, must have total debts below £50,000, assets below £2,000, a vehicle worth less than £4,000, and monthly surplus income of £75 or less. If all criteria are met and the DRO is granted, qualifying debts are discharged after 12 months.
• A DMP is the most flexible of the three but offers the least protection. It is available from both free providers — such as StepChange, National Debtline, and Citizens Advice — and commercial firms, which may charge setup and monthly fees. FCA rules prohibit fee structures that result in customers paying substantially all fees before creditor repayments begin. Because the arrangement is informal, it can be adjusted, paused, or cancelled, but creditors are equally free to reject the terms or take legal action at any time.

• IVA: Legally binding insolvency procedure. Requires 75% creditor approval. Typically lasts 60 or 72 months. Binds all unsecured creditors.
• DRO: Administrative insolvency procedure. Strict criteria (debt <£50k, assets <£2k, vehicle <£4k, surplus income <£75, non-homeowner). Free application. Debts discharged after 12 months.
• DMP: Informal, non-statutory arrangement. Flexible but no protection. Creditors can still take action.
• Secured Debts: Not affected by any of these solutions.
• Credit Impact: IVAs and DROs recorded as insolvency events; DMPs as defaults/arrangements. History remains for six years.
• Homeowners: Cannot get a DRO. IVA Protocol 2025 protects family home from realisation but may extend term.