IVA vs DRO - Which Debt Solution is Right for You?

IVA vs DRO: Complete Comparison

Both IVAs and Debt Relief Orders (DROs) are formal debt solutions that can write off your debts. However, they're designed for very different financial situations.

Quick Comparison Table

Factor IVA DRO
Minimum Debt £6,000+ No minimum
Maximum Debt No limit £30,000
Duration 5-6 years 12 months
Cost £5,000-£8,000 (from payments) £90 (one-time fee)
Monthly Payments Yes (£80-100+) No
Income Limit No limit Under £75 surplus/month
Asset Limit No limit Under £2,000
Homeowner Eligibility Yes ✅ No (limited equity only)
Vehicle Value Limit Reasonable value OK Under £2,000
Credit Impact 6 years 6 years
Geographic Availability England, Wales, NI England, Wales, NI
Creditor Approval Required (75%) Not required
Savings Allowed Some Under £1,000

What is a Debt Relief Order (DRO)?

A DRO is often called "bankruptcy light" - it's a simpler, cheaper formal debt solution for people with:

  • Low income
  • Minimal assets
  • Debts under £30,000

Key features:

  • Costs only £90
  • Lasts 12 months
  • No monthly payments
  • Debts written off after 12 months
  • Similar restrictions to bankruptcy

Detailed Comparison

1. Eligibility Criteria

IVA Eligibility

You need:

  • £6,000+ unsecured debt
  • Regular income (any amount)
  • Ability to pay £80-100+ monthly
  • 2+ creditors
  • Live in England, Wales, or NI

No restrictions on:

  • Maximum debt amount
  • Asset values
  • Income levels
  • Homeownership

✅ Flexible criteria - suitable for wide range of situations

DRO Eligibility

You need ALL of these:

  • Debts under £30,000
  • Disposable income under £75/month
  • Assets worth under £2,000
  • Vehicle worth under £2,000 (or no vehicle)
  • Savings under £1,000
  • Live in England, Wales, or NI
  • Haven't had DRO in last 6 years

❌ Strict criteria - many people don't qualify

Example - DRO Qualified:

  • Debts: £18,000
  • Income: £900/month (benefits)
  • Expenses: £850/month
  • Disposable: £50/month ✅
  • Assets: £500 ✅
  • Car: £1,200 ✅
  • Result: Qualifies for DRO

Example - DRO NOT Qualified:

  • Debts: £18,000
  • Income: £1,600/month
  • Expenses: £1,400/month
  • Disposable: £200/month ❌ (over £75 limit)
  • Result: Doesn't qualify, needs IVA instead

2. Cost Comparison

IVA Costs

Total cost: £5,000-£8,000 typically

Breakdown:

  • Nominee fee: £1,000-£2,000 (setup)
  • Supervisor fee: 15-20% of payments (ongoing)
  • Duration: 5-6 years of fees

Example:

  • Monthly payment: £150
  • Over 60 months: £9,000 total paid
  • Fees (30%): £2,700
  • To creditors: £6,300

Upfront: £0

DRO Costs

Total cost: £90

Breakdown:

  • Application fee: £90 (paid to approved intermediary)
  • No other fees
  • No monthly payments

Example:

  • One-time payment: £90
  • Over 12 months: £90 total
  • All goes to application, not fees
  • Nothing to creditors

Upfront: £90 (can sometimes be helped by charities)

HUGE DIFFERENCE: DRO is £90 vs IVA £5,000-£8,000

3. Duration

IVA Duration

  • Standard: 60 months (5 years)
  • Extended: 72 months (6 years) if equity release fails
  • Early completion: Possible with lump sum

Long commitment: 5-6 years of payments and restrictions

DRO Duration

  • Standard: 12 months
  • Cannot extend: Fixed 12-month period
  • Early completion: Not applicable

Short duration: Just 12 months then complete

HUGE DIFFERENCE: 12 months vs 5-6 years

4. Monthly Payments

IVA Payments

Required: Yes, monthly payments based on disposable income

Amount:

  • Minimum: £80-100 typically
  • Maximum: Based on affordability
  • Average: £150-£250

Duration: Every month for 5-6 years

Total typically paid: £5,000-£18,000

Reviews: Annual reviews may increase payments

DRO Payments

Required: No monthly payments

Amount: £0

Duration: N/A

Total paid: £90 application fee only

Reviews: Financial situation reviewed but no payment changes

HUGE DIFFERENCE: £0 monthly vs £80-100+ monthly

5. Asset Protection

IVA Assets

Can keep:

  • Your home (usually)
  • Reasonable car (£2,000-£5,000+)
  • Household furniture
  • Tools of trade
  • Pensions
  • Savings (some)

May need equity release: Year 5 if homeowner

Example:

  • Home value: £200,000
  • Mortgage: £150,000
  • Equity: £50,000
  • IVA: Keep home, may need to remortgage year 5

DRO Assets

Very limited assets allowed:

  • Total assets under £2,000 (excluding essentials)
  • Car under £2,000 value
  • Savings under £1,000
  • Essential household items exempt

Cannot be homeowner (or minimal equity only)

Example:

  • Home value: £200,000
  • Mortgage: £150,000
  • Equity: £50,000
  • DRO: ❌ Too much equity, cannot qualify

KEY DIFFERENCE: IVAs protect substantial assets; DROs only for those with minimal assets

6. Income Requirements

IVA Income

Required: Regular income source

Acceptable:

  • Any amount of employment income
  • Self-employment income
  • Pension income
  • Disability benefits + income
  • Multiple income sources

Disposable income: Must afford £80-100+ monthly

No upper limit on income

DRO Income

Required: Less than £75/month disposable income

Calculation:

Total monthly income
MINUS allowable expenses  
= Disposable income (must be under £75)

Example - Qualifies:

  • Income: £1,100/month
  • Expenses: £1,050/month
  • Disposable: £50/month ✅

Example - Doesn't Qualify:

  • Income: £1,500/month
  • Expenses: £1,300/month
  • Disposable: £200/month ❌

KEY DIFFERENCE: DRO for very low income only; IVA for any income level

7. Debt Limits

IVA Debt Limits

Minimum: £6,000 typically Maximum: No legal limit

Suitable for:

  • £6,000 - £10,000 (if can afford payments)
  • £10,000 - £50,000 (very common)
  • £50,000 - £100,000 (common)
  • £100,000+ (less common but possible)

DRO Debt Limits

Minimum: No minimum Maximum: £30,000 (strict limit)

Suitable for:

  • £500 - £30,000 (if meet other criteria)
  • £30,001+ (❌ cannot qualify)

KEY DIFFERENCE: DRO caps at £30,000; IVA has no upper limit

8. Types of Debt Included

IVA - Included Debts

✅ Can include:

  • Credit cards
  • Personal loans
  • Overdrafts
  • Store cards
  • Payday loans
  • Catalogue debt
  • Council tax arrears (most)
  • Utility bill arrears
  • HMRC debts
  • Benefit overpayments (most)
  • Social fund loans

DRO - Included Debts

✅ Can include:

  • Credit cards
  • Personal loans
  • Overdrafts
  • Store cards
  • Payday loans
  • Catalogue debt
  • Council tax arrears
  • Utility bill arrears
  • Benefit overpayments
  • Some other qualifying debts

❌ Cannot include (DRO restrictions):

  • Secured debts
  • Court fines
  • Child maintenance
  • Student loans
  • Magistrates' court fines
  • Debts from fraud
  • Social fund loans (in some cases)

Mostly similar, but some differences

9. Restrictions During Term

IVA Restrictions (5-6 years)

Cannot:

  • Borrow over £500 without IP permission
  • Get credit cards (practically)
  • Act as company director (often)
  • Work in some financial roles

Can:

  • Continue self-employment
  • Have bank account
  • Own property
  • Travel abroad

DRO Restrictions (12 months)

Cannot:

  • Borrow over £500 at all
  • Act as company director
  • Act as charity trustee
  • Work in some financial roles
  • Create, manage, or promote a company

Can:

  • Keep basic bank account
  • Travel abroad (inform OR if over 3 months)

Similar restrictions but DRO slightly stricter during the 12 months

10. Credit Impact

IVA Credit Impact

On credit file: 6 years from start date Credit score: Severely damaged Recovery: Gradual after 6 years

Timeline:

  • Years 1-6: IVA on file, very poor credit
  • Years 6-8: Rebuilding
  • Years 8+: Approaching normal

DRO Credit Impact

On credit file: 6 years from start date Credit score: Severely damaged (same as IVA) Recovery: Gradual after 6 years

Timeline:

  • Years 1-6: DRO on file, very poor credit
  • Years 6-8: Rebuilding
  • Years 8+: Approaching normal

IDENTICAL IMPACT: Both damage credit for 6 years

11. Employment Impact

IVA Employment

Most jobs: No impact

Some restrictions:

  • Financial services roles
  • Some company director positions
  • Licensed insolvency practitioners
  • Some professional body rules

Self-employed: ✅ Can continue

DRO Employment

Most jobs: No impact

Restrictions:

  • Cannot be company director
  • Cannot manage limited company
  • Financial services roles
  • Charity trustee

Self-employed: ✅ Can continue

Similar but DRO has company director ban

12. Application Process

IVA Process

  1. Find licensed Insolvency Practitioner
  2. Free consultation
  3. Provide financial information
  4. IP prepares proposal
  5. Sent to creditors for approval
  6. Creditors vote (need 75%)
  7. If approved, IVA begins

Duration: 6-12 weeks Complexity: Moderate Professional required: Licensed IP

DRO Process

  1. Contact approved intermediary (Citizens Advice, StepChange, etc.)
  2. Complete application with their help
  3. Provide evidence of circumstances
  4. Submit to Official Receiver
  5. OR reviews and approves (usually)
  6. DRO made (no creditor vote needed)

Duration: 2-6 weeks Complexity: Simpler Professional required: Approved intermediary (often free service)

DRO is simpler and quicker

When to Choose Each Solution

Choose DRO If You:

✅ DRO is ideal when:

  • Debts are under £30,000
  • You have less than £75/month disposable income
  • Assets worth under £2,000
  • No property or minimal equity
  • Car worth under £2,000 (or none)
  • Need cheapest solution (£90)
  • Want quickest resolution (12 months)
  • Cannot afford monthly payments
  • Meet all strict criteria

Example DRO candidate:

  • Sarah, 42, single parent
  • Income: £950/month (Universal Credit + part-time)
  • Debts: £14,000 (credit cards, catalogues)
  • Assets: £800
  • Car: £1,500
  • Rent: No property owned
  • Disposable income: £40/month
  • Perfect for DRO ✅

Choose IVA If You:

✅ IVA is ideal when:

  • Debts over £30,000 OR
  • Assets over £2,000 OR
  • Disposable income over £75/month OR
  • Own property OR
  • Need to protect assets
  • Can afford £80-100+ monthly
  • Have regular income
  • Don't qualify for DRO

Example IVA candidate:

  • Mark, 38, employed
  • Income: £2,000/month
  • Debts: £28,000 (credit cards, loans)
  • Assets: Homeowner, car worth £4,000
  • Disposable income: £200/month
  • Cannot get DRO (too many assets, too much income)
  • IVA is suitable ✅

Decision Scenarios

Scenario 1: Low Debt, Low Income, No Assets

Profile:

  • Debt: £8,000
  • Income: £800/month (benefits)
  • Assets: £400
  • Disposable: £20/month

Best choice: DRO ✅

  • Qualifies for all criteria
  • Only £90 cost
  • Complete in 12 months
  • No monthly payments

Scenario 2: Medium Debt, Medium Income, Renting

Profile:

  • Debt: £22,000
  • Income: £1,600/month
  • Assets: £1,500
  • Disposable: £150/month

Best choice: IVA ✅

  • Over £75 disposable income (DRO excluded)
  • Can afford IVA payments
  • IVA protects employment
  • Write off significant debt

Scenario 3: Low Debt, Homeowner

Profile:

  • Debt: £15,000
  • Income: £1,400/month
  • Home equity: £40,000
  • Disposable: £100/month

Best choice: IVA ✅

  • Over £2,000 assets (DRO excluded)
  • Homeowner (DRO excluded)
  • IVA protects home
  • Can afford payments

Scenario 4: High Debt, Low Income

Profile:

  • Debt: £35,000
  • Income: £900/month (benefits)
  • Assets: £600
  • Disposable: £30/month

Best choice: Bankruptcy or partial DRO ⚠️

  • Over £30,000 (DRO excluded)
  • Cannot afford IVA payments
  • Consider bankruptcy instead
  • Or negotiate debt write-down to under £30k for DRO

Pros and Cons Summary

DRO Advantages

  1. ✅ Extremely cheap (£90 only)
  2. ✅ Very quick (12 months)
  3. ✅ No monthly payments
  4. ✅ Simple process
  5. ✅ No creditor approval needed
  6. ✅ Ideal for low income

DRO Disadvantages

  1. ❌ Very strict criteria
  2. ❌ Low debt limit (£30,000 max)
  3. ❌ Asset restrictions (under £2,000)
  4. ❌ Income restrictions (under £75 disposable)
  5. ❌ Can't be homeowner (effectively)
  6. ❌ Not widely known about

IVA Advantages

  1. ✅ No debt limit (£6,000+)
  2. ✅ Protects home and assets
  3. ✅ Flexible criteria
  4. ✅ Any income level
  5. ✅ Suitable for homeowners
  6. ✅ Can continue self-employment

IVA Disadvantages

  1. ❌ Expensive (£5,000-£8,000 fees)
  2. ❌ Long commitment (5-6 years)
  3. ❌ Monthly payments required
  4. ❌ Needs creditor approval
  5. ❌ More complex process
  6. ❌ Annual reviews

Common Questions

Q: Can I choose between IVA and DRO if I qualify for both?
A: If you qualify for DRO, it's almost always the better choice (cheaper, quicker). However, some people prefer IVA for privacy reasons.

Q: What if my debt is £31,000 - just over the DRO limit?
A: You cannot get a DRO. Consider: 1) IVA, 2) Negotiating debt write-down to under £30k, 3) Bankruptcy.

Q: Can I pay creditors to get under £30,000 for a DRO?
A: Technically yes, but if you have money to pay creditors, you probably don't need a DRO. Depends on circumstances.

Q: What if I get a pay rise during my DRO?
A: If your disposable income goes over £75/month, you must inform the Official Receiver. Your DRO may be revoked and debts return.

Q: Is a DRO easier to get than an IVA?
A: If you meet the strict criteria, yes - no creditor approval needed. But the criteria are very strict.

Q: Which is worse for my credit - IVA or DRO?
A: Identical 6-year credit impact. No practical difference.

Q: Can I have a car with a DRO?
A: Yes, if worth under £2,000. If essential for work or disability, up to £2,000 value may be allowed additionally.

Summary: Key Differences

Consideration Choose DRO Choose IVA
Debt Amount Under £30,000 £6,000+ (no maximum)
Your Income Very low Any level
Your Assets Minimal (under £2,000) Any level
Homeowner No Yes
Monthly Payments Can't afford any Can afford £80-100+
Duration Preference Want quick (12 months) OK with 5-6 years
Cost Preference Want cheapest (£90) OK with £5,000-£8,000

Next Steps

To Apply for DRO

Contact approved intermediaries:

  • Citizens Advice: Local bureau
  • StepChange: 0800 138 1111
  • National Debtline: 0808 808 4000
  • AdviceUK: Find local advice center

They'll assess eligibility and help with application (often free).

To Apply for IVA

  1. Check IVA eligibility
  2. Calculate IVA payment
  3. Find licensed Insolvency Practitioner
  4. Get free consultation
  5. Compare 2-3 IPs

Still Unsure?

Use our Debt Solution Comparator to see which solution suits your circumstances best.

Remember: If you qualify for a DRO, it's almost always better (cheaper, quicker). But most people with £6,000+ debt and regular income won't qualify due to strict criteria.

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