Money Wellness

IVA (individual voluntary arrangement) vs DRO (debt relief order)

If you’re unable to keep up with your unsecured debt repayments, you may be considering a debt solution.

Two common debt solutions are an individual voluntary arrangement (IVA) and a debt relief order (DRO). But how do you know which one is right for you?

In this guide, we compare the two to help you decide which, if either, is a suitable solution for you.

Both solutions are available in England, Wales and Northern Ireland.

Person managing their money from their phone

The difference between an IVA and bankruptcy

Duration

IVA

An IVA usually lasts five or six years.

DRO

A DRO lasts 12 months.

Fees

IVA Fees

There are always fees for an IVA but they can vary quite a bit between companies. If you get an IVA from our sister company, they’ll only charge a fee if your IVA is accepted by your lenders. Those fees are paid out of – not on top of – your regular, affordable IVA payments.

DRO Fees

Free.

Lender contact

IVA

Lenders included in your IVA can’t chase you for payment or take legal action.

DRO

Lenders can’t chase you for payment or take legal action in connection to any debts covered by your DRO.

Interest and charges

IVA

Interest and charges on your debts will be frozen.

DRO

When your DRO is accepted, you enter a 12-month period known as a ‘moratorium’ period. During this time your debts are frozen.

If your finances get better during the moratorium period, your lenders may ask you to pay them back and add interest and charges to what you owe.

If your situation doesn’t improve, your debts will be written off.

Public Register

IVA

The details of your IVA will be recorded in the public insolvency register.

They usually stay there until three months after your IVA ends.

DRO

The details of your DRO will be recorded in the public insolvency register.

They usually stay there until three months after your DRO ends.

Debt write off

IVA

Once you successfully complete your IVA – usually after five or six years - any outstanding unsecured debt included in your IVA is written off.

DRO

Your debts will be written off after 12 months.

Home

IVA

Homeowners

You won’t be forced to sell your home. But you may need to remortgage to raise money to go towards your debts. If you’re unable to remortgage, you may need to carry on making your IVA payments for up to an extra 12 months.

Renters

An IVA should have no effect. But some private landlords include a condition in the tenancy agreement that means you could be asked to leave if you take out an IVA.

DRO

Homeowners

You can’t get a DRO if you’re a homeowner.

Renters

You will usually be allowed to stay in your home if your rent is up to date. But some private landlords include a condition in the tenancy agreement that means you could be asked to leave if you enter any type of insolvency debt solution.

You could also be asked to leave if you’re behind with your rent.

Car

IVA

You will typically be allowed to keep your car as long as its value isn’t excessive.

DRO

You’ll be allowed to keep your car as long as it’s worth no more than £2,000. From 28 June 2024, this will increase to £4,000. 

Job

IVA

For most people, an IVA won’t affect their job. But it may prove problematic in certain professions.

If you’re a solicitor or an accountant, for example, you might not be able to carry on in your current position with an IVA. Or you may only be allowed to keep your job subject to certain conditions.

DRO