Expert Debt advice & solutions.

Overview

A DMP is an informal arrangement that helps you combine your debt repayments into one affordable amount, allowing you to pay creditors back one month at a time. This monthly payment will be based on your budget and is calculated by taking your monthly incomings and outgoings into account. 

After the reduced monthly rate has been calculated, it will be proposed to each of your creditors and if they accept it, you can make monthly debt repayments over an extended period of time. With a DMP, you only pay what you can afford so if your circumstances change then the monthly payment amount may be altered to reflect this.

As a DMP is an informal agreement, it isn’t legally binding. This means there is no minimum period you’re tied in with it and you or your creditors are free to cancel at any time. 

Pros

Combined debt repayment
A DMP combines multiple debts into one affordable payment, making it easier to manage and helps avoid late fees from juggling multiple creditors.

Affordable payments
Your monthly payment is based on your income and expenses, ensuring you only pay what you can afford.

Potential to freeze interest
Your provider may negotiate with creditors to freeze interest and charges, helping you repay debt faster.

Less contact with creditors
Your debt advisor handles communications, reducing the number of calls and letters from creditors.

Not recorded on the Insolvency Register
Unlike IVAs or bankruptcy, a DMP isn’t publicly recorded, keeping your finances private.

Cons

No debt write-off
Unlike IVAs or bankruptcy, a DMP doesn’t write off debt. You must repay the full amount, often making it a more expensive option.

Longer repayment period
Since all debt must be repaid, a DMP can take years to complete, lasting longer than other debt solutions.

No legal protection
A DMP isn’t legally binding, so creditors can still contact you, stop the agreement or take legal action at any point.

Doesn’t cover all debts
DMPs only cover non-priority debts like credit cards, not priority debts which include things like rent, court fines and electricity bills.

Credit card accounts must be closed
Any credit card accounts included in your DMP must be closed and you may be advised to close others to avoid further debt.

Fees

The process of setting up a DMP involves various costs and so it’s normal for your DMP provider to charge you a fee to cover these. There are two main types of fees you might encounter with a DMP:

Arrangement fee
This one-time fee covers the setup of your DMP, including assessing your finances, drafting a payment plan, and negotiating with creditors. It can often be paid in instalments.

Monthly management fee
A monthly fee covers the ongoing management of your DMP, including liaising with creditors and providing continued support. This is typically a percentage of your payments but is capped at 50%.

Overview
Available to people in England, Wales and Northern Ireland, IVAs are a formal, legally binding agreement between you and your creditors that sees you pay towards your debts over a set time period.

An IVA operates under the Insolvency Act 1986 and the Insolvency Rules 2016 and, as such, your creditors will be bound by the law. An IVA typically lasts for around five or six years. Once it ends, any outstanding eligible debt included in the IVA, is written off.

While you are in an IVA, your creditors must stop chasing you for repayment and they are not permitted to charge interest on your debts. Any contact between you and your creditors goes through the Insolvency Practitioner (IP) working on your behalf.

During the IVA, you’re required to make agreed payments. This might be a monthly sum or a single lump sum.

Pros

Some debt may be written off
An IVA allows you to write off a portion of your debt once you’ve completed the agreed repayment term. This helps reduce the overall amount you need to repay.

Protection from creditors
Once an IVA is in place, creditors cannot take legal action against you or chase you for payments, offering relief from constant calls and letters.

Personal assets are protected
IVAs do not require you to sell your home but you may be required to sell your car if you have a high value vehicle.

Interest is frozen
During an IVA, interest and charges on your debts are frozen, meaning your repayments directly reduce what you owe rather than just covering interest.

Ongoing support
A licensed Insolvency Practitioner (IP) will manage your IVA, offering guidance and support throughout the repayment period to help you stay on track.

Cons

Your credit score will be impacted
An IVA remains on your credit file for six years, making it harder to obtain credit, including loans, mortgages, and credit cards.

Not all debts are covered
IVAs only apply to unsecured debts like credit cards and personal loans. Secured debts, such as mortgages or car finance, must still be repaid separately.

Strict budgeting is required
You must adhere to a set budget for the duration of your IVA, which can last up to six years, requiring significant lifestyle adjustments.

Your name is made public
An IVA is recorded on the Individual Insolvency Register, which can be accessed by anyone, including employers, landlords, and lenders.

Creditors must agree
For an IVA to go ahead, at least 75% of creditors (by debt value) must approve it. If they reject it, you may need to consider alternative debt solutions.

You must comply with the terms of the IVA
As an IVA is a legally binding agreement between you and your creditors, if you don’t stick to the terms of the IVA, the IVA may fail and an alternative solution will be needed.

Fees

At MoneyPlus, we never ask for upfront fees. Instead, these are covered by your monthly contributions. Before committing to an IVA, we’ll explain all fees and how they’re calculated.

There are three types of IVA fees:

Nominee’s fee
This covers setting up your IVA, including preparing your proposal and liaising with creditors. It is usually £2,100 but may be reduced by your creditors.

Supervisor’s fee 
This covers ongoing IVA management, typically £2,100, although once again, your creditors may reduce it.

Disbursement costs 
Miscellaneous expenses like third-party fees, insurance, legal advice, and property valuations.

Bankruptcy is a formal insolvency solution that means your outstanding debts are written off. Bankruptcy is available to people living in England, Wales and Northern Ireland. The equivalent for people living in Scotland is called Sequestration. A legally binding solution, it is intended for people who can’t repay their debts using income or assets in a reasonable period of time.

To declare bankruptcy, you will need to apply through the Insolvency Service in England and Wales, or through the High Court in Northern Ireland. Applying for bankruptcy will require an initial fee of £680. You can pay this in instalments, but you’ll need to have paid the full amount before you submit your application.

A decision on your application for bankruptcy will be returned to you within 28 days. Once declared bankrupt, the Official Receiver or Trustee in bankruptcy will look at the value of all your assets and any charges on them. They may ask for the assets to be sold or consider other options. These include your home, cars and all assets which will go towards paying back your outstanding debts.

Pros

Wipes away unsecured debts
Bankruptcy eliminates most unsecured debts, such as credit cards, personal loans, and payday loans, but there may be occasions when there are debts that are not discharged, such as debt obtained through fraud.

Stops legal actions
Once declared bankrupt, creditors can no longer take legal action against you, including court orders and bailiffs.

Living allowance
You’ll keep enough money to cover your everyday living costs and essentials during the bankruptcy process. If, after a review of your income and expenditure, it’s determined you can afford payments towards an Income Payments Agreement, you’ll make payments for 3 years. If not, no payments will be required.

Cons

Loss of possessions
Bankruptcy may lead to the repossession or sale of valuable assets, including your home or car, to help settle debts.

Initial fee
Filing for bankruptcy comes with an upfront cost, although it may be possible to pay this off in instalments.

Public record
Your bankruptcy is recorded on the Bankruptcy Insolvency Register, which is publicly accessible and may impact your ability to get credit in future.

Credit rating impact
Bankruptcy damages your credit score for up to six years, making it harder to obtain future credit or loans during that period.

Fees

To apply for bankruptcy, you’ll need to pay a £680 fee. It is a one-time cost that covers the administrative costs of processing your bankruptcy petition, including court fees and the involvement of an Official Receiver. You can pay this in instalments, but you’ll need to have paid the full amount before you submit your application.

A DRO is designed for those living in England, Wales, or Northern Ireland with little or no surplus income or assets they can put towards repaying their debts. DRO applicants typically don’t have their own car or property, or assets worth more than £2,000. They also have a disposable income (after household bills and other necessary payments) of no more than £75 a month. 

When you enter a DRO, interest and charges are frozen for 12 months. This is called the moratorium period, and your DRO ends automatically at the end of it. During this time, you must tell the Official Receiver if your financial situation improves, such as an increase in income. If there are no significant changes, the debts included in the DRO will be written off.

Pros

Potential to write off debts
Once completed, any outstanding eligible debt included in the DRO will be written off. This is a major benefit for individuals struggling with unmanageable debt.

No debt repayments for 12 months
With a DRO, you don’t make payments towards the included debts, and they are written off after 12 months, as long as your financial situation doesn’t significantly improve.

Creditors cannot contact you
During the 12 months, creditors cannot contact you, which means no phone calls, emails, or letters.

No need to appear in court
Unlike other debt solutions, a DRO doesn’t require you to go to court, making it a simpler, less intimidating option for those looking for debt relief.

Cons

Not available if you own property
A DRO is not available if you own property, so homeowners are ineligible. This can be a significant disadvantage for people with assets they wish to protect.

Your credit rating will be affected
A DRO will negatively impact your credit rating for up to six years, making it difficult to obtain credit or loans in the future. This can hinder financial opportunities post-DRO.

Only available if you owe less than £50,000
To qualify for a DRO, your unsecured debts must be below £50,000. This restriction means that those with larger debts will need to consider alternative debt solutions.

Accounts cannot be added after the DRO is approved
You cannot add any accounts once the application has been approved. Any creditors left out, must be paid in accordance with the credit agreement, so it’s important to ensure all eligible creditors are included.

Fees
There are no fees for DROs since the £90 was scrapped in 2024.