What Is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your unsecured creditors to repay part of what you owe over a fixed period. In most cases, an IVA runs for five years. At the end of the arrangement, any remaining unsecured debt included in the IVA is legally written off.

An IVA is a form of personal insolvency, which means entering one is a serious financial decision with long-term consequences. It can only be set up and supervised by a licensed Insolvency Practitioner (IP) — a qualified professional who is authorised under the Insolvency Act 1986 to handle personal insolvency cases. You cannot set up an IVA yourself.

IVAs have helped hundreds of thousands of people across England and Wales manage unmanageable debt in a structured way that avoids the more severe consequences of bankruptcy.

How Does an IVA Work?

The IVA process starts when you approach a licensed Insolvency Practitioner or a company that works with IPs. They will carry out a thorough review of your income, outgoings, assets, and debts to calculate what you can genuinely afford to contribute each month towards your debts, after covering all your essential living costs.

The IP then drafts a formal proposal to send to your creditors. This document sets out the monthly payment you will make, the length of the arrangement, how fees will be covered, and what happens at the end of the term. A creditors’ meeting is held — usually electronically — at which creditors vote on whether to accept the proposal.

For an IVA to be approved, creditors holding 75% or more of the total debt value must vote in favour. This threshold is measured by the value of debt, not the number of creditors. Once approved, the IVA becomes legally binding on all creditors — including any who voted against it or did not respond to the vote.

Who Is Eligible for an IVA?

There is no legal minimum debt threshold for an IVA, but in practice they are typically used for debts of around £6,000 or more. For an IVA to work, the proposal must make commercial sense for creditors — they need to believe they will receive a better return through the IVA than through an alternative such as bankruptcy.

To be suitable for an IVA, you generally need:

• Regular, predictable income. An IVA requires you to make consistent monthly payments over five or six years. If your income is highly variable or unreliable, maintaining an IVA becomes much more difficult.
• At least two creditors. An IVA requires a creditor vote, so a minimum of two creditors is needed. Single-creditor IVAs are exceptionally rare.
• Primarily unsecured debts. IVAs are designed for unsecured debts — credit cards, personal loans, overdrafts, store cards, catalogue debts, payday loans, and some tax debts. They do not cover mortgage or secured loan repayments.
• Residency in England, Wales, or Northern Ireland. Scotland has its own equivalent, called a Protected Trust Deed.

What Debts Are Included in an IVA?

The following types of debt are typically included:

• Credit cards and store cards
• Personal loans and payday loans
• Bank overdrafts
• Catalogue and mail order debts
• Council tax arrears (in many cases)
• HMRC tax debts (subject to negotiation)
• Business debts (if you are personally liable)

The following debts cannot be included in an IVA:

• Mortgages or secured loans
• Student loans
• Child maintenance arrears
• Court fines and criminal fines
• Debts incurred through fraud

What Happens to Your Home in an IVA?

Unlike bankruptcy, your home is not automatically at risk in an IVA. This is one of the most significant differences between the two solutions, and it is a primary reason why homeowners with problem debt often consider an IVA before bankruptcy.

However, if you are a homeowner, there is an equity clause in standard IVA terms. In the final year of your IVA, you will typically be asked to obtain a valuation of your property and, if equity is available, to attempt to remortgage to release some of it into the IVA. There are limits on how much you are required to release.

If you are unable to remortgage — which is common, given the impact of an IVA on your credit file — your IVA will typically be extended by 12 months of additional payments instead. This means homeowners often have a six-year IVA rather than five years.

How Much Does an IVA Cost?

IVA fees are paid from within your monthly contributions — they are not added on top of what you pay each month. Your IP receives their fees as a proportion of what you pay in before distributing the remainder to your creditors. This means you are not writing a separate cheque to your IP.

Fees typically include a nominee fee (for setting up the IVA and conducting the creditors’ meeting) and an annual supervisor’s fee charged throughout the duration of the arrangement. The total fees across the life of an IVA can range from around £3,000 to £10,000 or more, depending on the complexity of the case. By law, all fees must be fully disclosed to you in writing before you agree to proceed.

How Does an IVA Affect Your Credit File?

An IVA will be recorded on your credit file for six years from the date it starts — not from when it ends. Because a standard IVA lasts five years, it will typically remain on your credit file for only one year after it completes. During the six-year period, obtaining mainstream credit, a mortgage, or most financial products will be difficult.

Your IVA will also appear on the publicly searchable Individual Insolvency Register. It is removed from the register three months after the IVA ends.

What If an IVA Fails?

If you miss payments without agreeing a variation with your IP, or if your circumstances change so significantly that the arrangement cannot continue, your IP may issue a certificate of termination. This ends the IVA, and your debts return to their original position — creditors can resume contact and enforcement action. In many cases, a failed IVA leads to bankruptcy.

This is why it is critical to contact your IP immediately if your circumstances change during the IVA — a reduction in income, for example — rather than simply missing payments. IPs have flexibility to modify arrangements through a variation meeting, and early communication gives the best chance of keeping the arrangement on track.

IVA vs Other Debt Solutions

An IVA is appropriate in specific circumstances. It is worth comparing it to other options before deciding:

• IVA vs DRO: A Debt Relief Order is free, lasts 12 months, and writes off debts up to £50,000 — but requires no home ownership, income under £75/month spare, and assets under £2,000. Where eligible, a DRO is generally simpler and less demanding than an IVA.
• IVA vs Bankruptcy: Bankruptcy costs £680, discharges in 12 months, and puts home equity at immediate risk. An IVA protects your home better but requires five to six years of monthly contributions.
• IVA vs DMP: A Debt Management Plan is informal, not legally binding, and does not write off any debt. Creditors do not have to freeze interest. A DMP may suit someone who can realistically repay everything over time; an IVA is for those who genuinely cannot.

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.

Updated for 2026

What Is the Breathing Space Scheme?

The Breathing Space scheme — officially called the Debt Respite Scheme — is a government initiative that gives people struggling with problem debt a temporary period of legal protection from creditor action. During this protected period, most creditors must stop adding interest and charges to your debts, pause enforcement action, and stop contacting you about repayment.

The scheme was introduced in May 2021 and continues to help thousands of people across England and Wales each year. It is not a debt solution in itself — it does not write off or reduce what you owe — but it provides vital breathing room so you can get proper debt advice and explore which solution is right for your situation, without the constant pressure of creditor contact and escalating balances.

The Two Types of Breathing Space

There are two distinct types of breathing space available, depending on your circumstances:

Standard Breathing Space

This is available to anyone in problem debt who is working with a registered debt adviser. It provides up to 60 days of legal protection from most creditor action. During this period:

• Interest, fees, and charges on qualifying debts must be frozen
• Most enforcement action — including bailiff visits and new court proceedings — must be paused
• Creditors must stop contacting you about the included debts
• New county court judgments cannot be sought for qualifying debts

Mental Health Crisis Breathing Space

This is available to people who are receiving mental health crisis treatment. It lasts for the full duration of your crisis treatment, plus 30 additional days. There is no upper time limit — it continues for as long as you remain in crisis treatment. This recognises that people in a mental health crisis are particularly vulnerable and need extended protection from financial pressure.

The same protections apply as with standard breathing space, but the duration can be significantly longer depending on how long the mental health treatment continues.

Who Can Use Breathing Space?

To be eligible for standard breathing space, you must meet the following conditions:

• You must be an individual (not a business) living in England or Wales
• You must have at least one qualifying debt that you are struggling to repay
• You must not already be in a current insolvency procedure — this includes an active IVA, Debt Relief Order, or undischarged bankruptcy
• You must not have had a standard breathing space in the previous 12 months (this 12-month restriction does not apply to mental health crisis breathing space)

You cannot apply for breathing space directly. It must be applied for on your behalf by a registered debt adviser at an FCA-authorised organisation. This ensures the scheme is used by people who genuinely need it and are engaging with the debt advice process.

How to Apply for Breathing Space

The process is straightforward once you engage with a debt advice provider:

1. Contact a debt advice service. Reach out to a free, regulated debt advice organisation. They will assess your financial situation and determine whether breathing space is appropriate for you.
2. Your adviser registers the breathing space. If you are eligible, your debt adviser submits the application electronically on your behalf. Your creditors are notified and the protections begin immediately.
3. You engage with the advice process. During the breathing space period, you must continue to work with your adviser. If you stop cooperating, the breathing space can be cancelled early.

The whole process is handled by your adviser, so you do not need to contact your creditors yourself at any point.

What Is Protected — and What Is Not?

Most personal unsecured debts can be included in a breathing space, including credit cards, personal loans, overdrafts, council tax arrears, utility bill arrears, rent arrears (in most cases), and hire purchase debts. The protections apply specifically to the debts included in your breathing space.

Certain debts and obligations are not covered by breathing space:

• Ongoing liability for council tax for the current year (though council tax arrears can be included)
• Court fines and criminal fines
• Child maintenance payments
• Student loans

Your adviser will be able to confirm exactly which of your specific debts qualify and which do not.

Your Responsibilities During Breathing Space

Breathing space is not a holiday from your finances. You have ongoing responsibilities during the protected period:

• You must continue to pay your ongoing bills as they fall due — breathing space does not pause your regular outgoings such as rent, mortgage payments, or utilities for the current period
• You must engage with your debt adviser and cooperate fully with the advice process
• You must inform your adviser of any significant change in your circumstances

If you fail to cooperate with your debt adviser, they can cancel the breathing space before the 60 days are up. This is rare, but it is important to stay engaged throughout the process.

What Happens After the 60 Days?

The breathing space period gives you protected time to explore your debt solution options with the help of your adviser. During those 60 days, your adviser should work with you to identify the most appropriate route forward — whether that is a Debt Management Plan, an IVA, a Debt Relief Order, or another solution.

At the end of the breathing space, the protection from creditor action ends. If no longer-term solution has been put in place, creditors can resume contact and enforcement. This is why it is crucial to use the 60 days productively by genuinely engaging with your adviser and making progress towards a plan.

For many people, breathing space acts as the gateway to a formal debt solution. For others, it provides enough time to negotiate directly with creditors and arrange manageable repayments informally.

Breathing Space and Mental Health

The mental health crisis breathing space is a particularly important provision for people at their lowest point. Financial stress and mental health problems frequently go hand in hand, and the cycle of creditor contact, threatening letters, and enforcement action can make it extremely difficult for someone in crisis to take positive steps.

If you are receiving crisis care from a mental health professional and you have problem debts, ask your doctor, nurse, or care coordinator whether mental health crisis breathing space might be appropriate. Your mental health care team or a debt adviser working with mental health services can help arrange this.

Is Breathing Space Right for You?

Breathing space is worth considering if you:

• Are being contacted by multiple creditors and feeling overwhelmed
• Are facing imminent enforcement action such as bailiffs or a county court judgment
• Need time to seek proper debt advice without the pressure of escalating interest and charges
• Are in a mental health crisis and need extended protection while receiving treatment

It is also worth knowing what breathing space will not do. It will not write off your debt, reduce your balances, or resolve your debt problem on its own. But as a protective breathing space — a pause that allows you to get organised, take advice, and plan — it can be an invaluable first step.

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.

Updated for 2026

What is a Debt Relief Order?

A Debt Relief Order (DRO) is a formal insolvency solution available to people in England and Wales who have low income, few assets, and debts they genuinely cannot repay. It is designed specifically for those who are in serious financial difficulty but do not have the means to enter an Individual Voluntary Arrangement (IVA) or pay the fee for bankruptcy.

Once approved, a DRO places a 12-month moratorium on your qualifying debts. During that period, your creditors cannot contact you, add interest or charges, or take enforcement action. If your financial situation has not materially improved at the end of the 12 months, all the debts included in the order are written off completely.

Crucially, applying for a DRO is entirely free. The £90 application fee that previously applied was abolished in June 2024, removing one of the key barriers that stopped people in genuine hardship from accessing this form of debt relief.

Who Can Apply for a Debt Relief Order?

To qualify for a DRO, you must meet all of the following criteria at the time your application is submitted:

• Total qualifying debts of no more than £50,000. This threshold was raised from £30,000 in June 2024, making DROs accessible to a significantly larger number of people. Eligible debts include credit cards, personal loans, overdrafts, utility arrears, council tax arrears, and rent arrears.
• Disposable income of less than £75 per month. After paying all essential living costs — rent or mortgage, food, utilities, and travel to work — you must have less than £75 per month remaining. If you have more spare income than this, a DRO is not available to you.
• Total assets worth less than £2,000. This includes savings, valuables, and equipment, but excludes basic household furniture and tools needed for your employment. The limit was raised from £1,000 in 2021.
• No vehicle worth £4,000 or more. You may own one vehicle, provided it is valued below £4,000. If your vehicle exceeds this limit, you do not qualify unless it has been adapted for a disability. This threshold was doubled from £2,000 in June 2024.
• Not a homeowner. If you own any share of a property — whether freehold, leasehold, or part-ownership — you cannot apply for a DRO. Homeowners with unmanageable debt should instead consider an IVA or bankruptcy.
• Not subject to another insolvency procedure. You cannot already be in a DRO, an IVA, or undischarged bankruptcy at the time of application.
• No DRO in the last six years. If you have had a DRO approved within the previous six years, you are not eligible to apply for another one.
• Living or working in England or Wales. Scotland has its own debt solutions. You must have been resident or carrying on business in England or Wales within the last three years.

How to Apply for a DRO

Unlike bankruptcy, you cannot apply for a Debt Relief Order yourself. The application must be submitted by an approved intermediary — a debt adviser who is authorised by a competent authority recognised by the Insolvency Service. This is an important safeguard to ensure the process is used correctly and that applicants genuinely meet the eligibility criteria.

Approved intermediaries are typically found at free debt advice charities and organisations. The process works like this:

1. Seek free debt advice. Contact a free, regulated debt advice organisation. A qualified adviser will assess your income, debts, and assets in detail to determine whether a DRO is the right option for your situation.
2. Gather your financial information. You will need a complete list of all your debts, a clear picture of your monthly income and outgoings, and a list of everything you own. Your adviser will help you compile this information accurately.
3. Application submitted at no cost. Your approved intermediary submits the application electronically to the Insolvency Service’s Adjudicator. There is no application fee payable by you.
4. DRO approved and registered. If the application is accepted, the DRO is registered on the Individual Insolvency Register and the 12-month moratorium begins immediately.

What Happens During the 12-Month Moratorium?

Once your DRO is in place, you receive immediate relief from creditor pressure. All creditors listed in the DRO must stop contacting you, cannot add further interest or charges to the debts, and cannot take any enforcement action — including sending bailiffs or applying for county court judgments.

However, there are important restrictions you must follow during the moratorium period:

• You must not borrow £500 or more without disclosing to the lender that you are subject to a DRO
• You cannot act as a company director or be involved in forming or managing a limited company without the court’s permission
• Any significant improvement in your financial circumstances — such as receiving an inheritance, a windfall, or a substantial pay rise — must be reported to the Insolvency Service promptly
• If your circumstances improve enough that you no longer meet the eligibility criteria, the DRO may be revoked

What Debts Are Not Covered?

While a DRO covers most types of unsecured debt, certain debts cannot be included and will remain your responsibility regardless:

• Student loans
• Child support and maintenance arrears
• Court fines and criminal fines
• Social Fund loans
• Debts incurred through fraud

It is important to identify any debts of this type before applying, as they will still need to be dealt with separately after the DRO is approved.

How Does a DRO Affect Your Credit File?

A Debt Relief Order will appear on your credit file for six years from the date it is approved. During this time, obtaining mainstream credit, a mortgage, or many financial products will be very difficult. However, for people who are already in serious debt distress, the practical impact on their credit file is often less significant than the immediate relief the DRO provides.

The DRO is also listed on the public Individual Insolvency Register. It is removed from the register three months after the moratorium period ends — typically 15 months after the DRO started.

DRO vs Bankruptcy: Which Is Right for You?

Both a DRO and bankruptcy result in debts being written off, but they suit different circumstances:

• DRO is free, requires no income contributions, and is appropriate for people with debts under £50,000, no assets above £2,000, and no home ownership. It is generally the simpler and less severe option where eligibility is met.
• Bankruptcy costs £680 to apply for, can include people with higher levels of debt and those who own property (though home equity is at risk), and also lasts 12 months before discharge. It is a more powerful tool for people with larger debts or who do not meet the DRO eligibility criteria.

A free debt adviser can help you determine which option is more appropriate for your individual situation.

Find Out What Options Are Available to You

Everyone’s situation is different. Use our free fact-finder to see which debt solutions you may be eligible for — no obligation, no commitment.

Check Your Options Now

For free, impartial debt advice you can contact Money Helper at moneyhelper.org.uk

The information on this page is for general guidance only and does not constitute financial advice. Always seek independent professional advice before making a decision about a debt solution.

Updated for 2026

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