3 Types of Bankruptcies in the UK: Bankruptcy, DRO and IVA Explained

The UK has three formal routes for personal debts you cannot repay: bankruptcy, a Debt Relief Order (DRO), and an Individual Voluntary Arrangement (IVA). All three are legally binding, all three are run through the Insolvency Service or the courts, and all three stay on your credit file for six years. The right one depends on how much you owe, what you earn, what you own, and whether you want to keep your home. The figures below are for England and Wales, checked against GOV.UK guidance on 14 November 2026. Scotland and Northern Ireland have their own systems.

Figure 1: A judge with a gavel. Bankruptcy, a Debt Relief Order, and an IVA are the three formal insolvency routes in England and Wales.

The three routes side by side

1. Bankruptcy

Bankruptcy is the formal court route for people who cannot pay their debts and for whom the other routes do not fit. You apply online at gov.uk, and it costs £680: a £130 adjudicator fee and a £550 Official Receiver deposit. You can pay the fee in instalments before you submit. If you receive qualifying means-tested benefits, you can ask for the fee to be waived.

Once you are bankrupt, an Official Receiver takes control of your money and assets. Your home can be sold, and you may have to pay part of your income to your creditors for up to three years under an income payments agreement. You are usually discharged after 12 months, which frees you from most of your debts. Some debts are not covered, such as student loans, child maintenance, and court fines. Bankruptcy is listed on the public Insolvency Register while it is active, and it stays on your credit file for six years.

2. Debt Relief Order

A Debt Relief Order is the low-cost route for people with small debts, little income, and few assets. It is free. The £90 fee was scrapped on 6 April 2024, so a DRO now costs nothing to apply for. Many older pages still quote £90, and that figure is out of date. You cannot apply on your own: an approved debt adviser checks that you qualify and applies for you.

To qualify in England and Wales, you must pass all of these tests: you owe less than £50,000, you have less than £75 a month spare after essential costs, you own assets worth less than £2,000, you do not own a vehicle worth £4,000 or more, you do not own your home, you have lived or worked in England and Wales in the last 3 years, and you have not had a DRO in the last 6 years. The debt limit was raised from £30,000 to £50,000 in June 2024, and the vehicle limit was raised from £2,000 to £4,000 at the same time. A DRO lasts 12 months. During that time your creditors cannot chase the debts in it, and at the end those debts are written off if you kept to the rules.

Figure 2: A judge's gavel. A DRO is free since the £90 fee was scrapped on 6 April 2024, but you still need an approved debt adviser to apply.

3. Individual Voluntary Arrangement

An IVA is a formal deal with your creditors, arranged by a licensed insolvency practitioner. You make one affordable monthly payment for five or six years, and at the end the unpaid balance of the debts in the IVA is written off. At least 75% of your creditors by debt value must agree to the proposal. An IVA has no upfront fee: the practitioner's fees come out of your monthly payments, and average about £5,000 over the life of the arrangement, according to Citizens Advice.

An IVA suits people with a regular income who can afford monthly payments and who want to protect their home. It is binding on all the creditors in it once it is approved, so they cannot chase you for the debts it covers. The trade-off is the length: five or six years of payments, and the IVA stays on your credit file for six years. If the payments fail, the IVA can fail, and your creditors can pursue the full debts again, including bankruptcy.

Which route fits

• Debts under £50,000, no home, little spare income: a DRO. It is free, it takes 12 months, and it writes the debts off.
• Regular income, debts of £10,000 or more, home to protect: an IVA. You repay what you can afford for five or six years.
• Debts of any size, no income to repay them, other routes do not fit: bankruptcy. It costs £680 and usually ends after 12 months, but your home and assets are at risk.
• You can still pay, just not all at once: none of the three. A Debt Management Plan, an informal deal to pay in instalments, may fit better, and it does not touch your credit file in the same way.

Get free advice first

Do not choose a route on your own. Free debt advice is available from StepChange on 0800 138 1111, from the National Debtline on 0808 808 4000, and from Citizens Advice. A debt adviser will check which route you qualify for, what it costs, and what it does to your home and your credit file. Be careful with firms that charge for IVA advice: the free services do the same checks for nothing, and the Insolvency Service has warned about poor practice among some commercial IVA providers.

Sources: GOV.UK, Debt Relief Orders and Apply for bankruptcy; Insolvency Service review of DRO reforms, 2024; Citizens Advice, IVA fees; StepChange and National Debtline. Figures checked on 14 November 2026. Rules differ in Scotland and Northern Ireland, so check the guidance for your nation.

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