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Debt / Insolvency

Updated 2026-04-09

Debt Relief Order (DRO) vs Individual Voluntary Arrangement (IVA)

Comparing a Debt Relief Order with an IVA for those with low incomes and minimal assets.

Overview

Both Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs) are formal insolvency processes that can write off debt, but they are designed for very different financial situations. A DRO is a low-cost solution for those with very low income and minimal assets. An IVA requires a regular income to fund monthly payments over 5 years.

Side-by-Side Comparison

Debt Relief Order (DRO)

Cost: £90 application fee

Time: 12-month moratorium; debts written off at the end

Pros

Very low cost — the application fee is £90
Grants a 12-month moratorium (creditors cannot pursue you)
All qualifying debts written off at the end of the 12-month moratorium
Can be applied for online through an authorised intermediary

Cons

Strict eligibility caps — debts must be under £30,000; assets under £2,000; surplus income under £75/month
You cannot include secured debts (mortgage, car finance) or student loans
Certain debts survive: child maintenance, court fines, fraud debts
Restrictions for 12 months — cannot obtain credit over £500 or act as company director

Best For

Renters (not homeowners) with low income, small amounts of unsecured debt, and little surplus income — typically those on Universal Credit or other benefits.

Individual Voluntary Arrangement (IVA)

Cost: IP fees £3,000–£8,000 (taken from monthly contributions)

Time: 5 years (occasionally 6)

Pros

No upper debt limit — suitable for those with large debts (over £30,000)
Homeowners can usually keep their home
Can include tax debts and HMRC liabilities
Creditors bound by majority vote — cannot pursue you outside the IVA

Cons

Requires regular monthly payments for 5 years — unsuitable if income is low or irregular
High IP fees (£3,000–£8,000) taken from contributions
Failure leads to IVA collapse — may then proceed to bankruptcy
Not available online — must use a licensed IP

Best For

Those with regular income, significant debts (particularly over £30,000), or assets (especially a home with equity) who want to avoid bankruptcy.

Key Differences

AspectDebt Relief Order (DRO)Individual Voluntary Arrangement (IVA)

Debt limitUnder £30,000No limit

Asset limitUnder £2,000 (excluding car worth under £2,000)No limit — but home equity may be subject to clause

Income requirementSurplus income under £75/monthRegular income to fund monthly payments required

Cost£90£3,000–£8,000 (IP fees)

Duration12-month moratorium then write-off5 years of monthly payments

HomeownersCannot own property worth more than the asset capYes — home usually retained (subject to equity release)

Our Recommendation

If you are a renter on a low income with debts under £30,000 and minimal assets, a DRO is a quick and cheap solution. If you own a home, have a higher income, or have debts over £30,000, consider an IVA. Always take free, independent advice before choosing — contact National Debtline (0808 808 4000) or StepChange. Be wary of fee-charging IVA firms that take upfront fees before the IVA is approved.