Bankruptcy Alternatives: Your Options Explained
Bankruptcy is not your only option. Before you apply, make sure you understand the alternatives available to you.
England, Wales and Northern Ireland
The options below apply if you live in England, Wales or Northern Ireland.
Formal Debt Solutions
A formal debt solution is legally binding. Once in place, your creditors must follow the terms and cannot take further action against you for the debts included.
Debt Relief Order (DRO)
A DRO is similar to bankruptcy but designed for people with lower debts (under £50,000), few assets and little spare income. It costs £90, lasts 12 months and your debts are written off at the end. Applied for through an authorised debt adviser.
Individual Voluntary Arrangement (IVA)
An IVA is a formal agreement to repay a proportion of your debts over five or six years, managed by an insolvency practitioner. Unlike bankruptcy, you may be able to keep your home and assets. Remaining debt is written off at the end.
County Court Administration Order (CCAO)
A CCAO lets you make a single affordable monthly payment towards debts under £5,000 where at least one CCJ exists. The court distributes payments between creditors. A composition order may write off part of the debt.
Informal Debt Solutions
Informal Solutions
An informal solution is not legally binding. Creditors are not obligated to stick to the terms, but in practice many are willing to work with you if you are making genuine efforts to repay.
Debt Management Plan (DMP)
A DMP is an informal agreement with your creditors to repay debts in full at a reduced monthly rate. There is no fixed time limit. Interest and charges may be frozen by some creditors, though this is not guaranteed. You can set one up yourself or use a free provider such as StepChange.
How Does Bankruptcy Compare?
In England and Wales, you apply for bankruptcy online through the GOV.UK adjudicator service. The application fee is £680. You do not need to attend court. Once made bankrupt, you are usually discharged after 12 months, and most of your unsecured debts are written off.
Bankruptcy may affect your home, car and other assets. You may also need to make monthly payments from your income if you have disposable income. Your name will appear on the Individual Insolvency Register and your credit rating will be affected for six years.
For a full breakdown, visit our bankruptcy guides, covering the application process, your assets, property and income payments.
Which Option Is Right for You?
The right option depends on how much you owe, what assets you have, your income, and your personal circumstances. Before making a decision, get free, independent advice from a qualified debt adviser.
Contact StepChange Debt Charity on 0800 138 1111, or speak to Citizens Advice for free guidance on all of these options.
The information on this page is for general guidance only and does not constitute financial advice. You should seek independent advice before making any decisions about your debt.