DRO vs IVA comparison documents on a desk showing two debt solution options

DRO vs IVA: Which Debt Solution Is Right for You in 2026?

Updated for 2026

If you are weighing up a DRO vs IVA and trying to work out which debt solution fits your situation, you are not alone. A Debt Relief Order (DRO) and an Individual Voluntary Arrangement (IVA) are two of the most widely used formal debt solutions in England and Wales, yet they work in very different ways. With the DRO debt threshold now set at £50,000 and the application fee removed entirely, the landscape has shifted. This guide breaks down both options so you can see which one could work for you.

What Is a Debt Relief Order?

A Debt Relief Order is a formal insolvency solution designed for people with relatively low levels of debt, minimal assets, and little or no spare income. It is administered by the Insolvency Service and lasts for 12 months.

During those 12 months, your creditors cannot chase you for payment or add interest to your balances. If your financial situation has not improved by the end of the moratorium period, the debts included in the DRO are written off completely.

Key features of a DRO

Available for total qualifying debts up to £50,000
No application fee (previously £90)
You can keep a vehicle worth up to £4,000
Your total assets must not exceed £2,000
You must have no more than £75 per month in spare income
Lasts 12 months, after which included debts are written off

You cannot apply for a DRO directly. Instead, you go through an approved debt adviser, known as an intermediary. Organisations like StepChange and Citizens Advice can help with this process at no cost. For a full list of debts that qualify, read our guide on debts that can be included in a Debt Relief Order.

What Is an Individual Voluntary Arrangement?

An IVA is a legally binding agreement between you and your creditors. You agree to make affordable monthly payments over a fixed period, typically five or six years, and in return your creditors agree to freeze interest and write off any remaining balance at the end of the arrangement.

An IVA must be set up and supervised by a licensed insolvency practitioner. Once 75% of your creditors (by debt value) vote to accept the proposal, all creditors included in the arrangement are bound by its terms.

Key features of an IVA

Suitable for debts typically over £6,000
Monthly payments based on what you can genuinely afford
Lasts five to six years
Protects your home and other assets from being sold
Interest and charges are frozen once the IVA is approved
Remaining debt is written off at completion

If you are wondering whether you qualify, our guide on whether you can get an IVA covers the eligibility criteria in detail.

DRO vs IVA: The Key Differences

Both a DRO and an IVA deal with unsecured debts and give you legal protection from creditor action. Beyond that, they differ in several important ways.

Cost

A DRO is free to apply for. An IVA involves fees, but these are built into your monthly payments, so you do not pay anything upfront.

Duration

A DRO lasts 12 months. An IVA runs for five to six years. If speed matters to you and you meet the DRO criteria, it offers a much shorter path to becoming debt free.

Monthly payments

With a DRO, you make no payments at all. With an IVA, you make a single monthly payment based on your disposable income. The amount is agreed during the proposal stage and reviewed annually.

Asset protection

A DRO has strict asset limits: your total assets cannot exceed £2,000 and your vehicle cannot be worth more than £4,000. An IVA is more flexible. Homeowners can usually keep their property, though they may need to release equity in the final year.

Debt ceiling

A DRO covers debts up to £50,000. There is no upper debt limit for an IVA, making it the better option if your total borrowing exceeds the DRO threshold.

DRO vs IVA: Eligibility at a Glance

Your eligibility depends on several factors. Here is a quick comparison.

For a DRO, you need total qualifying debts of £50,000 or less, spare income of no more than £75 per month, total assets under £2,000, and you must not be a homeowner. You also cannot have had a DRO in the previous six years.

For an IVA, you typically need debts of at least £6,000 owed to two or more creditors, and enough disposable income to make regular monthly contributions. There is no asset cap, and homeowners can apply.

If your circumstances sit somewhere between the two, it is worth speaking to a qualified debt adviser. MoneyHelper offers free, impartial guidance and can help you understand which route is realistic for your situation.

How a DRO or IVA Affects Your Credit File

Both a DRO and an IVA are recorded on your credit file and remain visible to lenders for six years from the start date. During this period, you will find it harder to obtain credit, though not impossible.

The key difference is timing. Because a DRO only lasts 12 months, you may find it easier to start rebuilding your credit score sooner, even though the record stays on your file for six years. With an IVA lasting five to six years, you are restricted for most of the time the entry is visible.

Both solutions are also recorded on the Individual Insolvency Register, which is a public database maintained by the Insolvency Service. Your entry is removed three months after the DRO or IVA ends.

For practical tips on rebuilding after a debt solution, take a look at our article on why an IVA can still be worth it.

Which Debt Solution Should You Choose?

There is no single right answer. The best option depends entirely on your own circumstances.

A DRO is generally the better fit if you have little or no disposable income, owe less than £50,000, rent your home, and have minimal assets. It costs nothing, lasts just 12 months, and wipes your qualifying debts clean at the end.

An IVA tends to suit people who have some disposable income each month, may own property they want to protect, or owe more than £50,000. It takes longer, but it allows you to repay a portion of what you owe in a structured, manageable way.

If neither option feels right, there are other routes to consider. Our guide on how to become debt free covers the full range of solutions available in the UK.

Frequently Asked Questions About DRO vs IVA

Can I switch from a DRO to an IVA or vice versa?

Not directly. If your DRO is revoked because your circumstances change, you could then explore an IVA as an alternative. Similarly, if an IVA fails, a DRO might be possible provided you meet the eligibility criteria at that point.

Will a DRO or IVA stop bailiff action?

Both provide legal protection against most creditor enforcement once in place. Creditors included in a DRO or IVA cannot pursue bailiff action, court proceedings, or contact you to demand payment.

Can self-employed people apply for a DRO or IVA?

Yes. Self-employed individuals can apply for either option. A DRO works if your business generates very little income and you meet the asset limits. An IVA may be more practical if you have variable self-employed income and want to continue trading while repaying debts.

What debts cannot be included?

Neither a DRO nor an IVA covers priority debts such as child maintenance, magistrates court fines, student loans, or social fund loans. Secured debts like mortgages are also excluded. Only unsecured debts, such as credit cards, personal loans, overdrafts, and catalogue debts, can be included.

Do I need to use a solicitor?

No. A DRO is arranged through a free debt advice service. An IVA is set up by a licensed insolvency practitioner, whose fees are included in your monthly payments. You do not need separate legal representation for either option.

Ready to Find Out Which Solution Fits You?

Use our free eligibility checker to see whether a DRO, IVA, or another debt solution could help you take control of your finances. There is no obligation and it only takes a couple of minutes.

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