IVA or DRO: Which is the best debt solution for you?

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This guide will compare IVAs and DROs in more detail so you can familiarise yourself with the advantages and disadvantages of each and take the first step towards a debt-free future.

If your debts are getting to a point where they’re becoming increasingly difficult to manage, you may have considered seeking financial help in the form of an IVA or a DRO.

But while both debt solutions can help make your repayments more manageable and put a stop to further legal action from your creditors, choosing one can be easier said than done.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and the individuals or businesses you owe to repay a portion of your unsecured debt through a series of affordable monthly payments. Secured loans can’t usually be included in an IVA.

Individual Voluntary Arrangements (IVAs) typically last five years but your term can be extended by 12 months if you have a temporary payment break, miss payments, or fail to release equity from your home. During this time, your credit score will be negatively affected.

Once your IVA has come to an end, any remaining debts will be written off and you’ll be free to start afresh with your finances. However, if your IVA lasts the standard five-year term, you’ll have to wait another year until it’s removed from your credit report.

What is a DRO?

A Debt Relief Order (DRO) is a debt solution designed for people who have a relatively low debt level, have little to no assets, and are on a low income. The main aim of a DRO is to pause your debts for a set period in the hope that your financial situation improves during this time.

Debt Relief Orders (DROs) typically last 12 months, during which time all payments, including interest and charges, will be frozen and your creditors won’t be able to contact you about the debt. However, if your financial situation improves within this time, your DRO will be revoked and you’ll be expected to resume payments as normal.

Once your DRO comes to an end, all financial restrictions will be lifted and your remaining debts will be written off – allowing you to make a fresh financial start.

What do IVAs and DROs have in common?

IVAs and DROs are designed for different financial situations, but they still share some similarities. Here are some of the key parallels between IVAs and DROs:

Your remaining debts will be written off

Both IVAs and DROs can allow you to write off your remaining debts when your arrangement comes to an end.

This will happen if you keep up with your monthly payments for the duration of your IVA or if your financial situation remains unchanged throughout your DRO.

All interest and charges will be frozen

During an IVA and a DRO, your creditors will be instructed to freeze all interest and charges on the debt.

So regardless of whether you’re in an IVA or DRO, you’ll be protected from further fees and can focus on repaying your existing balance.

Your details will be added to a public register

The Individual Insolvency Register (IIR) is a public database that contains information about every IVA and DRO less than six years old.

These details can be accessed by anyone but are typically only viewed by banks, lenders, and some employers when running credit checks on you.

Your credit rating will be affected

Unfortunately, there isn’t a debt solution that won’t affect your credit rating in some way and the likelihood of you being able to obtain credit while you’re in an IVA or a DRO is slim.

This is because evidence of either implies that you’ve struggled with debt in the past and there’s a greater chance that you could default on a future credit agreement.

What are the main differences between IVAs and DROs?

Despite sharing some similarities, IVAs and DROs can affect your finances in different ways and lead to very different outcomes. Here are some of the main differences between IVAs and DROs:

Eligibility criteria

Before you choose between an IVA and a DRO, it’s important to consider whether you’re eligible.

For example, there is no maximum debt level required for an IVA but a DRO is capped at £30,000 (£50,000 from June 2024). So if you have a total debt level of £55,000, for example, you’ll qualify for an IVA but not a DRO.


While IVAs and DROs are visible on your credit file for six years from the date of approval, an IVA typically lasts five years while a DRO lasts 12 months.

IVAs can also be extended by an additional 12 months if you miss payments and need to make up the remaining money owed.

Types of debt

IVAs can be used for most unsecured debts, including payday loans, credit cards, overdrafts, catalogues, and personal loans.

DROs, on the other hand, can also be used to repay utility arrears, council tax arrears, and debts owed to family or friends.


Having an IVA can put any high-value items you own, like a home or a car, at risk of being sold to repay your debt.

With a DRO, however, any assets you own (including savings) must be worth less than £2,000 for your application to be approved.

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What are the advantages of an IVA?

There are several reasons why thousands of people decide to enter into an IVA every year. Here is a brief guide to some of the main advantages of having an IVA:

You make one affordable monthly payment

When you have an IVA, you’ll be required to make a single payment to your Insolvency Practitioner (IP) each month.

They will then distribute the money among your creditors and, if necessary, communicate with them to negotiate more favourable payment terms.

Your repayment term is fixed

With an IVA, you’ll be expected to make payments for a fixed period of five years.

Once your creditors have agreed to this, they can’t change their minds at a later date or ask to extend your repayment term.

You don’t need to deal with your creditors

One of the biggest advantages of an IVA is not having to deal with your creditors for the duration of your arrangement.

The role of your IP is to act as a third party between you and your creditors and communicate with them on your behalf so you don’t have to.

Your fees are included in your monthly payments

With an IVA, all administrative fees are included in your monthly payments.

This means you’ll always know exactly how much you’re going to pay and will never be asked to send any additional money outside of your usual monthly payments.

What are the advantages of a DRO?

While IVAs are the preferred choice for many people, a DRO may be better suited to your financial situation. Here are some of the advantages of having a DRO:

Your creditors can’t take further action against you

While you’re in a DRO, your creditors will be prohibited from taking further action against you without express permission from the court.

This includes taking you to court and serving you with a County Court Judgment (CCJ).

Your assets will be protected

There is no need to surrender your assets when you’re in a DRO and your home or car will never be forcibly sold to recover the debt.

Unlike other debt solutions, such as bankruptcy, this can give you peace of mind that your belongings are safe and won’t be removed from your home at any point during your arrangement.

You’ll only be placed under restrictions for 12 months

DROs are one of the few debt solutions that take as little as 12 months to complete.

However, if you’re found to have enough disposable income left over to make payments towards your debts, you may need to continue making payments for up to three years after your bankruptcy comes to an end.

Most debts can be included

DROs can help you deal with a wide range of debts, including rent arrears, fuel debt, and council tax.

However, unlike an IVA, missed debts can’t be added at a later stage.

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From writing off a large portion of your debt, to readjusting your budget, we’ll find a solution that suits you.

Should I get an IVA or Debt Relief Order?

Choosing between two debt solutions can be difficult, and it’s normal to worry about whether you’ve made the right decision. However, the best option for you will depend on your individual circumstances, such as your disposable income, homeowner status, and assets.

Generally, an IVA will be better for you if you own your home and can afford to make monthly payments while a DRO will suit you if you have little to no assets and are financially unable to contribute anything towards your debt.

Don’t hesitate to seek expert debt advice if you need it. Whether you have a specific question or just want a second opinion, reaching out to a debt advisor or debt management company can put you on the right track and reassure you that you’re doing the right thing by dealing with your debts.


Both an IVA and a DRO can help you deal with your debts for a healthier financial future, but knowing which one choose can be difficult.

Before deciding how best to deal with your debts, it may also be worth considering what can happen if your DRO or IVA fails. The more information you have, the more equipped you are to make an informed decision.

Choosing a debt solution isn’t a choice that should be made lightly. Always reach out for free debt advice if you feel like you need it and never agree to anything without hearing all the facts.

Key Takeaways

An IVA is a formal agreement between you and your creditors to repay your unsecured debt over five to six years and write off any remaining debt
A DRO is a formal debt solution where your repayments are paused for a year and any remaining debts are written off after 12 months
Both IVAs and DROs freeze all interest and charges, appear on a public register, and affect your credit rating
IVAs and DROs have different eligibility criteria and qualifying debts and impact your assets differently
An IVA may be the best option for you if you have unsecured debts and own your home, while a DRO may be better suited if you have no disposable income and few assets
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:


Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

April 25 2024

Written by
Maxine McCreadie

Edited by
Ben McCormack

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