If you're struggling with debt, you may have come across two formal solutions: an Individual Voluntary Arrangement (IVA) and a Debt Relief Order (DRO). Both are forms of personal insolvency, both stop creditors chasing you, and both can lead to qualifying unsecured debts being written off. But they're designed for people in very different financial positions.
The biggest differences come down to how much spare income you have, what you own and how much you owe. This guide sets out how an IVA and a DRO compare, so you understand what each involves before speaking to an adviser.
The short answer
- A DRO is for people with very little spare income (under £75 a month), few assets and debts under £50,000.
- An IVA is for people who can afford a regular monthly payment to their creditors over five or six years.
- A DRO is free and usually lasts 12 months. An IVA has fees taken from your payments.
- Homeowners generally can't get a DRO, but an IVA is designed to let you keep your home.
- Under the IVA Protocol, an IVA shouldn't be offered to someone who would qualify for a DRO without explaining that option first.
IVA vs DRO at a glance
| IVA | DRO | |
|---|---|---|
| Who it's for | People with an affordable monthly surplus | People with little or no spare income and few assets |
| Debt level | No upper limit; usually used for larger debts with two or more creditors | Less than £50,000 |
| Spare income | Enough for a regular payment to creditors | Less than £75 a month |
| Assets | Can own assets, including your home | Less than £2,000 in total, plus a vehicle worth under £4,000 |
| Homeowners | Yes, designed to let you keep your home | Generally not available |
| Cost | Fees taken from your monthly payments | No fee |
| How long it lasts | Usually 5 or 6 years | 12 months |
| Monthly payments | Yes, reviewed every year | No payments to the debts included |
| Who approves it | Creditors vote; 75% by value of those voting must agree | The Official Receiver, via an approved debt adviser |
| Credit file | 6 years from the start date | 6 years from the start date |
| Where available | England, Wales and Northern Ireland | England and Wales; Northern Ireland has its own DRO scheme |
DRO limits are for England and Wales, as set by GOV.UK. Different solutions apply in Scotland.
How a DRO works
A debt relief order is designed for people on a low income with very few assets, who couldn't realistically make payments to creditors. You apply online through an approved debt adviser (you can't apply on your own), and the application goes to the Official Receiver. If it's approved, the debts included are frozen for 12 months. You don't make payments towards them, and interest and charges stop. If your situation hasn't improved at the end of the 12 months, those debts are written off.
To qualify in England and Wales, you generally need to:
- owe less than £50,000 in qualifying debts
- have less than £75 a month spare income after essential costs
- have less than £2,000 in assets, and not own a vehicle worth £4,000 or more
- not own your home
- have lived or worked in England or Wales in the last three years
- not have had a DRO in the last six years
There's no fee for a DRO. You can read the full criteria on GOV.UK's debt relief order page and in our guide to debt relief orders.
How an IVA works
An IVA is a legally binding agreement between you and your creditors, set up and supervised by a licensed insolvency practitioner. You make one affordable monthly payment, worked out from your income and essential living costs, usually for five or six years. Creditors vote on the proposal, and once it's approved, interest and charges on the debts included are frozen and creditors can no longer chase you. If you complete the IVA, any remaining qualifying unsecured debt is written off.
Because an IVA relies on regular payments, it needs you to have a stable, affordable surplus each month. Fees are paid from your monthly payments, and your income and spending are reviewed every year. See our guides on IVA monthly payments and how much an IVA costs.
Check which debt solutions you could qualify for. It won’t affect your credit score.
The key differences explained
Your spare income
This is usually the deciding factor. A DRO is only available if you have less than £75 a month left after essential costs. An IVA needs a surplus large enough to make a meaningful payment to your creditors over several years. If your income is mainly from benefits and you have little left over, an IVA is often not a good fit. Our guide to IVAs on benefits explains why.
Your home and assets
Homeowners are generally not eligible for a DRO, and there are strict limits on savings and other assets. An IVA can work for homeowners. Under the current IVA Protocol, the family home doesn't form part of the arrangement, although having significant equity can mean the IVA runs for six years rather than five. See IVAs for homeowners.
Cost and length
A DRO has no fee and usually lasts 12 months. An IVA runs for five or six years, with the insolvency practitioner's fees taken from your monthly payments. That means an IVA is a much longer commitment, which is why it needs to be affordable for the whole term.
Effect on your credit file and job
Both an IVA and a DRO stay on your credit file for six years from the start date and appear on the public Individual Insolvency Register while they're running, plus a short period after. Both can affect certain jobs and roles, particularly in financial services and law. You can't borrow more than £500 without telling the lender about either one. Read more in IVAs and your credit rating and will my employer find out about my IVA?
What if your situation changes?
A DRO is based on your circumstances when you apply. If your income or assets increase significantly during the 12 months, for example through a new job or an inheritance, you must tell the Official Receiver and the DRO could be revoked. An IVA is reviewed every year and payments can go up or down as your situation changes.
If you're already in an IVA and your income has dropped a long way, it may be possible to move to a DRO, but your IVA would need to end first. Our guide to ending an IVA and switching to another solution explains how that works.
The key takeaway
An IVA and a DRO are designed for different people. A DRO is for those with very little spare income and few assets, while an IVA is for those who can afford a regular payment and, often, want to protect their home. Other options such as a debt management plan or bankruptcy may also be worth considering. Free, independent advice is available from StepChange, National Debtline and Citizens Advice.
Common questions
What is the main difference between an IVA and a DRO?
An IVA is a formal agreement where you make affordable monthly payments to your creditors, usually for five or six years. A debt relief order (DRO) is designed for people with very little spare income and few assets. You make no payments, and qualifying debts are usually written off after 12 months.
Can I get a DRO if I own my home?
No. DROs are generally not available to homeowners. An IVA is one of the formal solutions that can work for homeowners, because it's designed to let you keep your property.
How much debt can you have for a DRO?
In England and Wales you must owe less than £50,000 of qualifying debt, have less than £75 a month spare income, have less than £2,000 in assets, and not own a vehicle worth £4,000 or more. Northern Ireland has its own DRO scheme with similar limits.
Does a DRO cost anything?
No. The application fee for a DRO in England and Wales was removed in April 2024, so there's no charge to apply. You must apply through an approved debt adviser.
Which is worse for your credit file, an IVA or a DRO?
Both stay on your credit file for six years from the date they start, and both appear on the public Individual Insolvency Register. A DRO ends after 12 months, while an IVA runs for five or six years, but the credit file entry lasts six years either way.
Can I switch from an IVA to a DRO?
Possibly, if your circumstances have changed and you now meet the DRO criteria. Your IVA would need to end first, and a DRO can't be approved while the register still shows your IVA as current. An adviser can help you work through the steps.
How IVA Advice Online can help
We'll look at your income, outgoings, assets and debts with you and explain which debt solutions you could qualify for. Where an IVA isn't suitable, we may refer you to a partner who specialises in other solutions such as DROs. To talk through your options, get in touch.