In Debt? Here Are Your Main Options Explained
Published 6th of April 2011·Updated 12 April 2026
Reviewed by: Reviewed for accuracy April 2026
If you are struggling with debt, you have more options than you might think. The right solution depends on how much you owe, whether you own assets, and whether you can make any regular payments. This guide explains the four main debt solutions available to people in the UK: debt consolidation loans, debt management plans, Individual Voluntary Arrangements (IVAs), and bankruptcy.
Short Summary
A debt consolidation loan combines all your unsecured debts into one monthly payment, which can be easier to manage. It works best if you have a steady income and a credit score good enough to qualify for a reasonable interest rate.
A debt management plan (DMP) lets you negotiate lower monthly payments with your creditors. It is not legally binding, but many creditors will agree to freeze interest while you repay. StepChange and Citizens Advice both offer free DMP services.
An IVA is a legally binding agreement to repay a portion of your debt over five or six years, after which the remainder is written off. It suits people with a regular income who cannot repay their debts in full within a reasonable time.
Bankruptcy writes off most debts immediately but has serious consequences for your assets and credit file. A free debt adviser from StepChange or Citizens Advice can help you decide which option fits your situation.
What Is a Debt Consolidation Loan?
A debt consolidation loan pays off all your existing unsecured debts in one go, leaving you with a single monthly payment to one lender. This simplifies your finances and can reduce your monthly outgoings if you spread repayments over a longer term.
The trade-off is that a longer loan term means more interest paid overall. Consolidation only makes financial sense if the new loan carries a lower interest rate than the debts you are replacing. Most high-street lenders including Barclays, HSBC and Lloyds offer consolidation loans, but you will typically need a fair-to-good credit score to qualify at a sensible rate.
Consolidation is best suited to people with a stable income who can commit to a fixed monthly payment. If your income is unpredictable, a debt management plan may be a safer fit.
What Is a Debt Management Plan (DMP)?
A DMP is an informal arrangement between you and your unsecured creditors to repay what you owe at a rate you can actually afford. A debt adviser contacts each creditor on your behalf and negotiates lower monthly payments. Many creditors will also agree to freeze interest and charges while the plan is active.
DMPs are not legally binding, which means creditors can opt out or resume adding interest at any time. However, in practice, most mainstream creditors accept DMPs arranged through reputable services. StepChange, the UK's leading debt charity, set up DMPs for free. You should never pay a commercial company to arrange a DMP if a free service can do the same job.
A DMP will appear on your credit file, which can affect future borrowing. The plan stays in place until all debts are cleared, which can take several years depending on how much you owe.
What Is an Individual Voluntary Arrangement (IVA)?
An IVA is a formal, legally binding agreement between you and your creditors, overseen by a licensed insolvency practitioner. You agree to make monthly payments for typically five or six years, after which any remaining debt included in the IVA is written off.
| Feature | DMP | IVA |
|---|---|---|
| Legally binding | No | Yes |
| Creditors must agree | Each individually | 75% by debt value |
| Remaining debt written off | No | Yes |
| Impact on credit file | Yes (6 years) | Yes (6 years) |
| Typical duration | Varies | 5-6 years |
| Cost | Free (via charity) | Insolvency practitioner fees apply |
IVAs are suitable for people who have a regular income but cannot repay their total debt within a reasonable timeframe. According to the Insolvency Service, around 80,000 IVAs were registered in England and Wales in 2023. They are not available in Scotland, where a Protected Trust Deed offers a similar outcome.
What Is Bankruptcy?
Bankruptcy is a legal process that writes off most debts you cannot repay. Once declared bankrupt, the official receiver takes control of your assets. Any non-essential property, including equity in your home, may be sold to repay creditors.
You are typically discharged from bankruptcy after one year, after which most debts are cleared. However, the bankruptcy stays on your credit file for six years, and certain debts including student loans, court fines and child support cannot be included.
Bankruptcy is generally considered a last resort. If you own your home or have significant savings or assets, the consequences can be severe. The government's Debt Relief Order (DRO) is a lower-cost alternative for people with very low income and minimal assets; it costs £90 to apply and has a debt threshold of £30,000.
Which Debt Solution Is Right for You?
| Your situation | Most likely option |
|---|---|
| Can repay debts in full but want one payment | Debt consolidation loan |
| Can afford some payments but not current amounts | Debt management plan |
| Have regular income; cannot repay in full | IVA |
| Cannot repay anything; no significant assets | Bankruptcy or DRO |
| Very low income; debts under £30,000 | Debt Relief Order |
The right choice is personal and depends on your full financial picture. A free, impartial debt adviser from StepChange (stepchange.org) or Citizens Advice can review your situation and recommend the best route without charging you a penny.
Frequently Asked Questions
Will a debt solution affect my credit score?
Yes, all formal debt solutions including DMPs, IVAs and bankruptcy will appear on your credit file for six years from the start date. This will make it harder to obtain credit during that period. However, if you are already missing payments, your credit file is likely already damaged; sorting out your debt is still the right move.
Can I choose which debts go into a DMP or IVA?
You must include all unsecured debts in a DMP or IVA. You cannot cherry-pick which debts to include. Secured debts (such as your mortgage) are handled separately and are not included in these arrangements.
Is it possible to get a mortgage after an IVA or bankruptcy?
Yes, but you will need to wait until the IVA or bankruptcy has been settled and removed from your credit file, which takes six years from the start date. Some specialist mortgage lenders may consider applications sooner, but interest rates will be higher. Speaking to a mortgage broker who specialises in adverse credit is the best approach.
What is a Debt Relief Order and who qualifies?
A Debt Relief Order (DRO) is a lower-cost alternative to bankruptcy for people with very low income, few assets and debts below £30,000. It costs £90 to apply, lasts 12 months, and writes off included debts at the end. You must apply through an authorised debt adviser, not directly to the Insolvency Service.
What happens if I ignore my debts?
Ignoring debts does not make them go away. Creditors can escalate to county court judgements (CCJs), which are added to your credit file and can be enforced through bailiffs or attachment of earnings orders. Acting early gives you far more options than waiting until creditors take legal action.
Are there any free debt advice services in the UK?
Yes. StepChange (stepchange.org or 0800 138 1111), Citizens Advice (citizensadvice.org.uk), National Debtline (nationaldebtline.org) and PayPlan (payplan.com) all offer free, impartial debt advice. You should never pay for advice that a charity can provide for free.