Bankruptcy, debt relief orders and IVAs in the UK: rules, costs, effects

In short

• Bankruptcy, a debt relief order (DRO) and an IVA are formal procedures for people who cannot pay their debts. The limits below apply to England and Wales.
• DRO: 12 months, no fee, debts of less than £50,000 (GOV.UK, as of November 2026). You apply through an approved debt adviser.
• IVA: an agreement with your creditors set up by an insolvency practitioner, usually 5 or 6 years, with fees averaging around £5,000 (Citizens Advice, as of November 2026).
• Bankruptcy: £680, and you are usually released after 12 months (GOV.UK, as of November 2026).
• A DRO and bankruptcy can stay on your credit record for up to 6 years, and after an IVA you might find it difficult to get credit for 6 years.
• Get free advice first (see "Where to get help"). This guide describes the rules; it does not choose a procedure for you.

What are the ways to deal with debt in England and Wales?

According to GOV.UK (as of November 2026), you can pay your debts in instalments through a Debt Management Plan, an administration order or an IVA. If you cannot pay them because you do not have enough money or assets you can sell, you can apply for a DRO or bankruptcy. GOV.UK advises speaking to a debt adviser, and MoneyHelper has information about free debt advisory services. Citizens Advice says you should get its advice before trying to get an IVA, and reminds you that you do not need to pay for a Debt Management Plan.

An administration order requires a debt of less than £5,000. Breathing Space (protection from creditors for up to 60 days) is described in our guide to bank accounts and credit history. We do not cover talking to HMRC about unpaid tax here; penalties for a late tax return are covered in our guide to the HMRC penalty.

Debt relief order (DRO): conditions, process and effects

According to GOV.UK (as of November 2026), a DRO is for people who do not own their home. Conditions:

• debts of less than £50,000 and spare income of less than £75 a month;
• assets worth less than £2,000 and no vehicle worth £4,000 or more;
• you have lived or worked in England and Wales within the last 3 years and have not applied for a DRO within the last 6 years.

Citizens Advice adds that you must not be going through another formal insolvency procedure, such as bankruptcy or an IVA. It also gives an exception for a vehicle adapted because of a disability: it can be excluded from your assets even if it is worth more than £4,000. You can exclude only one vehicle, and not one used solely for work. Check this with your adviser.

The sources describe the threshold amounts and the six-year condition differently (Citizens Advice says "not more than" for the amounts, and 6 years since your last DRO was made, unless it was revoked). If you are at a threshold or have previously applied for or had a DRO, ask an approved adviser to check your eligibility.

How a DRO works

1. Contact an approved intermediary. You cannot apply for a DRO on your own.
2. You apply through the adviser. It is free, and the adviser cannot charge you for their time.
3. For 12 months you stop making payments towards the debts covered by the DRO (including interest), but you still pay some debts not included in it, such as student loans and court fines.
4. After 12 months you do not need to pay those debts or follow the restrictions.

A DRO can be cancelled if your financial circumstances change, and extended if you do not follow the restrictions.

Restrictions and effects of a DRO

While you have a DRO, you must not borrow more than £500 without telling the lender, act as the director of a company, or open a bank account without telling the bank or building society. You may be prosecuted if you break these restrictions.

• Your bank might close your account, and your phone provider might end your contract.
• It stays on your credit record for 6 years. Citizens Advice says many private landlords and letting agencies insist on credit checks, so you may be turned down or charged higher fees. How to check your report is covered in our guide to credit scores.
• A DRO might affect applications for British citizenship. Get advice from an immigration specialist.

IVA: what it is, what it costs and what to watch for

According to GOV.UK (as of November 2026), an IVA (Individual Voluntary Arrangement) is an agreement with your creditors to pay all or part of your debts through regular payments to an insolvency practitioner, who divides the money between your creditors. Only an insolvency practitioner, a qualified lawyer or accountant, can set one up. An IVA starts if creditors holding at least 75% of your debts (by value) agree to it. It then applies to all your creditors, including any who disagreed.

Length and conditions (Citizens Advice):

• If your total debt is less than £10,000, high fees might mean an IVA is not the best option. You usually need spare income of at least £100 a month.
• If you pay monthly, an IVA usually lasts 5 or 6 years. If your share of the available equity in your home is more than £10,000, you pay for an extra year: 6 years instead of 5.
• If your payments are not enough to pay your debts in full by the end of the IVA, you do not have to pay the rest.

Costs. The fees for setting up and managing an IVA are around £5,000 on average. It is worth asking several insolvency practitioners for quotes. If creditors do not accept the IVA, you still need to pay the fees (Citizens Advice).

Beware of middlemen. According to Citizens Advice, a debt management company is likely to be more expensive because it charges its own fee on top. You can get an IVA without one, usually more cheaply, by going directly to an insolvency practitioner. Some companies charge a fee just for referring you to one.

Effects. An IVA does not include debts such as child maintenance arrears and student loans, and it does not stop your landlord taking action to evict you if you owe rent. You might find it difficult to get credit for 6 years after your IVA starts. If you do not keep up your payments, the insolvency practitioner can cancel the IVA and make you bankrupt.

Bankruptcy in the UK: cost, application and effects

According to GOV.UK (as of November 2026), bankruptcy means you could be free from most of your debts, though there are some you might still have to pay, such as child maintenance debts or student loans. You can only apply online, and it costs £680; if you are struggling to pay the fee, a charity may be able to help.

If having your address published would put you at risk of violence, you can apply to the court for a person at risk of violence (PARV) order. If you are applying for bankruptcy yourself, do this after you have started your application but before you submit it.

How to apply for bankruptcy

1. Gather information about your income, outgoings and debts.
2. Pay £680. You can pay in instalments, but you cannot submit your application until you have paid the full fee (GOV.UK).
3. Someone who works for the Insolvency Service (an "adjudicator") checks your application. If you have access to other money that covers your debts, they might refuse.
4. You get an email or letter within 28 days of submitting your application; it can take longer if the adjudicator needs to ask you more questions.

A creditor can also apply to make you bankrupt if you owe £5,000 or more.

Effects of bankruptcy

• Accounts and home. The bank will usually freeze your accounts. The trustee might also sell your home, depending on how much equity would be left after secured debts, such as a mortgage, were paid. Discuss the risk to your home with a free debt adviser before applying. Bankruptcy won't stop your mortgage lender taking steps to repossess your home if you fall behind with payments (Citizens Advice). If you rent, it is unlikely you will be asked to move out if you are up to date with your rent.
• Restrictions. You must not borrow more than £500 without telling the lender, or act as a director of a company without the court's permission.
• Spare income. An income payments agreement (IPA) can last up to 3 years. If your main or only income is from state benefits, your trustee will not normally ask for an IPA.
• Job. Generally, you don't have to tell your employer (Citizens Advice). If you are self-employed, your business is very likely to be closed.

After 12 months you are usually released ("discharged") automatically from your bankruptcy restrictions and debts; it can take longer if you do not co-operate with the trustee. Your name and address are published in the Gazette and the Individual Insolvency Register. Bankruptcy can stay on your credit record for 6 years from its date.

Scotland, Wales and Northern Ireland

Wales. The rules above apply to England and Wales. According to GOV.UK, the process to become bankrupt is different in Scotland and in Northern Ireland.

Scotland (mygov.scot, as of November 2026):

• The solutions are an informal agreement, the Debt Arrangement Scheme (DAS), a protected trust deed or bankruptcy.
• You apply for bankruptcy through an approved money adviser, not by yourself. The fee is £150, but some people do not need to pay it. You usually get a decision within 8 working days, and you are usually discharged after one year.
• Only a licensed insolvency practitioner can arrange a trust deed (mygov.scot).

Northern Ireland (nidirect, as of November 2026):

• Bankruptcy petitions can only be presented in the High Court in Belfast. According to nidirect, the fees include a £525 deposit, a £189 court fee and around £7 for a solicitor to witness you swearing your statement of affairs. Bankruptcy normally lasts for one year.
• According to nidirect, DROs are for people who cannot pay and do not owe more than £20,000. They do not involve the courts and are made through approved intermediaries (nidirect). We do not give other DRO conditions for Northern Ireland: check them with an adviser.
• An IVA generally requires unsecured debts of at least £15,000 (this depends on the individual creditors). According to nidirect, an IVA is accepted if creditors holding more than 75% of your debts by value agree to it (nidirect).

Frequently asked questions

Do bankruptcy, a DRO or an IVA stay on my credit record?

According to GOV.UK (as of November 2026), a DRO stays on your credit record for 6 years, the same as other debt relief options. Bankruptcy can stay there for 6 years from its date, and after an IVA you might find it difficult to get credit for 6 years.

Can I get a DRO or go bankrupt if I own my home or rent?

According to GOV.UK (as of November 2026), a DRO is for people who do not own their home. Bankruptcy won't stop your mortgage lender taking steps to repossess your home if you fall behind with payments. The trustee might also sell your home, depending on how much equity would be left after secured debts, such as a mortgage, were paid, so discuss the risk with a free debt adviser before applying. Rent arrears are included in bankruptcy, but your landlord can still take action to evict you.

Do I have to pay a company to set up a DRO or an IVA?

A DRO costs nothing (GOV.UK, as of November 2026), and according to Citizens Advice the adviser cannot charge you for their time. An IVA is set up by an insolvency practitioner for a fee. Complain to the debt management company first. If you are unhappy with its response and have not been able to reach an agreement, you can take your complaint to the Financial Ombudsman Service.

Will bankruptcy affect my job or immigration status?

According to Citizens Advice, generally you don't have to tell your employer, but you might find it more difficult to get a job in certain industries, such as the civil service, the police or a security firm. Bankruptcy could also have an impact on your immigration status or an application for British nationality (Citizens Advice). Ask an adviser about this.

Where to get help

As of November 2026.

• GOV.UK: options for dealing with your debts: GOV.UK advises speaking to a debt adviser.
• MoneyHelper: information about free debt advisory services (according to GOV.UK).
• Citizens Advice: advice before an IVA.
• Insolvency Enquiry Line (bankruptcy applications): 0300 678 0015, Monday to Thursday 9am to 5pm, Friday 9am to 3pm (GOV.UK).
• Scotland: mygov.scot, the "Get free debt advice" section.
• Northern Ireland: Advice NI and StepChange Debt Charity offer free and independent advice (nidirect).
• Financial Ombudsman Service: complaints about a debt company where you have not been able to reach an agreement after the company's response, 0300 123 9 123 (Citizens Advice).
• Samaritans: 116 123, every day at any time. More in our guide to mental health.