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.

What's in this guide?

The difference between an IVA and a DRO Deciding between an IVA and a DRO Can I change from an IVA to a DRO?What next?

The difference between an IVA and a DRO

	IVA	DRO
Duration	An IVA usually lasts five or six years	A DRO lasts 12 months.
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. Read more about individual voluntary arrangement fees.	Free.
Lender contact	Lenders included in your IVA can’t chase you for payment or take legal action.	Lenders can’t chase you for payment or take legal action in connection to any debts covered by your DRO.
Interest and charges	Interest and charges on your debts will be frozen.	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	The details of your IVA will be recorded in the public insolvency register. They usually stay there until three months after your IVA ends.	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	Once you successfully complete your IVA – usually after five or six years - any outstanding unsecured debt included in your IVA is written off.	Your debts will be written off after 12 months.
Home	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 on your living situation. 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.	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	You will typically be allowed to keep your car as long as its value isn’t excessive.	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	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.	For most people, a DRO 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 a DRO. Or you may only be allowed to keep your job subject to certain conditions.
Credit file	An IVA will remain on your credit file for six years from the date it’s agreed.	A DRO will remain on your credit file for six years from the date it’s approved.

Deciding between an IVA and a DRO

Whether an IVA or a DRO is suitable will depend on your personal circumstances.

An IVA might be suitable if you:

can’t afford to pay your debts at the rate you originally agreed to, but you can afford to pay something each month
want to protect assets like your home and car

A DRO might be suitable if you:

can't pay your debts
you have very little disposable income
owe less than £30,000 – this is increasing to £50,000 on 28 June 2024
don't own anything of much value
aren't a homeowner

There’s a lot to consider before committing to any debt solution. That’s why you should always get impartial debt advice first.

Can I change from an IVA to a DRO?

The rising cost of living means that many IVAs have become unaffordable over recent years. If you’re in this situation and you now qualify for a DRO, speak to your IVA firm about your options. One option would be to fail your IVA and apply for a DRO. Another option would be to ask your IVA firm to speak to your lenders and see if they would agree to complete your IVA early based on the amount of money you’ve already paid.

What next?

If you’re considering an IVA or a DRO, get debt advice. A professional debt adviser will make sure they understand the ins and outs of your situation and run through any suitable debt solutions.

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