When you cannot afford your debts, there is no single “one-size-fits-all” answer. The right path depends on your total debt level, whether you have spare income each month, and whether you own valuable assets like a home or car.
Below is an overview of the primary formal and informal debt solutions available in the UK, along with immediate legal protections.
At-a-Glance Comparison
| Solution | Best For | Typical Debt Level | Impact on Credit File | Cost / Fees |
| Breathing Space | Immediate relief while seeking advice | Any amount | None directly (lenders may note arrears) | 100% Free |
| Debt Management Plan (DMP) | People with steady spare monthly income | Any amount | Marked on credit file for 6 years | Free via charities (e.g. StepChange) |
| Debt Relief Order (DRO) | Low income, few/no assets, renting | Up to £50,000 | Stays on credit file for 6 years | Free (no application fee) |
| Individual Voluntary Arrangement (IVA) | Higher debt, protect home/assets, regular income | Usually £6,000+ | Stays on credit file for 6 years | Fees built into monthly payments |
| Bankruptcy | Unmanageable debt with no realistic repayment route | Any amount (usually high) | Stays on credit file for 6 years | £680 upfront court/adjudicator fee |
1. Breathing Space (Debt Respite Scheme)
An immediate pause on creditor enforcement.
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How it works: A government scheme giving you temporary legal protection from creditor contact, late fees, interest, and enforcement action. Standard Breathing Space lasts up to 60 days (or for the duration of crisis treatment plus 30 days under the Mental Health crisis route).
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Key advantage: Buys you calm, penalty-free time to speak with a debt adviser and set up a long-term plan.
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Requirements: You must apply through an authorised debt adviser (like StepChange or Citizens Advice).
2. Debt Management Plan (DMP)
An informal, flexible monthly repayment plan.
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How it works: You pool all your unsecured debts into a single, affordable monthly payment based on your realistic living costs. A debt charity distributes the money proportionally to your creditors.
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Key advantage: Completely flexible. If your income drops or living costs rise, payments can be adjusted.
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Things to consider: It is an informal agreement. Creditors are not legally bound to freeze interest or charges (though they usually do if arranged through a reputable charity), and your debts are not written off—you repay the full balance over a longer period.
3. Debt Relief Order (DRO)
A formal “mini-bankruptcy” for people with low income and few assets.
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How it works: Freezes debt repayments and interest for 12 months. If your financial situation hasn’t improved at the end of the year, all qualifying debts are legally written off.
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Eligibility criteria:
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Total qualifying unsecured debt under £50,000.
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Spare monthly income (after essential living costs) of £75 or less.
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Total assets worth £2,000 or less (plus one motor vehicle worth up to £4,000).
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You must not own a home or have an active mortgage.
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Cost: Free to apply via an approved intermediary/debt adviser.
4. Individual Voluntary Arrangement (IVA)
A formal, legally binding contract to pay a percentage of your debt.
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How it works: Set up by a licensed Insolvency Practitioner (IP). You agree to pay a set monthly amount (or lump sum) usually over 5 to 6 years. At the end of the term, any remaining eligible debt is written off.
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Key advantage: Legally stops creditors from taking court action. Homeowners can often protect their property rather than being forced to sell it (though equity release may be required).
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Things to consider: Strict budget restrictions apply throughout the term. If the arrangement fails, creditors can resume recovery or petition for bankruptcy.
5. Bankruptcy
A formal legal procedure to write off unaffordable debt when other options fail.
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How it works: Assets you own (excluding basic household items and tools needed for work) may be sold to pay creditors. Most remaining debts are discharged (written off), usually after 12 months.
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Key advantage: Provides a clean legal slate and ends creditor harassment immediately.
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Things to consider: High impact on professional licences, public records, and bank accounts. If you own your home, it will likely be sold. Requires an upfront application fee of £680.
Important Note for Scotland: Debt solutions in Scotland differ slightly (such as the Debt Arrangement Scheme (DAS), Trust Deeds, and Sequestration). Free debt charities can advise on Scots law.
Where to Get Free, Impartial Help
Never pay a private fee-charging company for debt advice when free, FCA-regulated charities provide the exact same solutions:
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StepChange Debt Charity: Free online debt assessments and setup for DMPs, DROs, and IVAs.
👉 stepchange.org | 0800 138 1111
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National Debtline: Practical fact sheets and telephone advisers.
👉 nationaldebtline.org | 0808 808 4000
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Citizens Advice: Free in-person, telephone, and web advice across the UK.
This website is tailored specifically for England and Wales