Understanding Your Debt Options in 2026: A Simple Guide

Updated for 2026

This guide covers the main debt solutions available in England and Wales as of 2026. Each option works differently, carries different consequences, and suits different circumstances. The goal here is to lay out the facts so you can start your research with a clearer picture.

Before diving in: none of what follows is financial advice. It is general information gathered from publicly available sources. Your circumstances are unique, and any decision about debt needs to be made with proper guidance from a qualified professional.

Individual Voluntary Arrangements (IVAs)

An IVA is a formal, legally binding agreement between you and the people you owe money to (your creditors). It is set up and supervised by a licensed insolvency practitioner, and once in place, it typically lasts five or six years.

During that time, you make regular monthly payments based on what you can realistically afford after essential living costs. At the end of the arrangement, any remaining debt included in the IVA is written off.

Key facts about IVAs:

They cover most unsecured debts, including credit cards, personal loans, catalogues, and overdrafts.
Creditors holding at least 75% of the total debt value need to agree to the proposal for it to go ahead.
Once approved, creditors named in the IVA cannot chase you for payment or add interest and charges.
An IVA will appear on your credit file for six years from the date it is approved.
It gets recorded on the Individual Insolvency Register, which is publicly searchable.
If you are a homeowner, you may be asked to release equity from your property in the final year. The rules around this have changed in recent years, so checking the current position is important.
Failing to keep up with payments can lead to the IVA failing, which could leave you back where you started, or worse.

IVAs tend to be considered by people with multiple unsecured debts who have a regular income and can commit to a structured repayment plan over several years.

Debt Relief Orders (DROs)

A DRO is designed for people with relatively low levels of debt, minimal assets, and little spare income. It provides a 12-month moratorium, during which creditors cannot pursue the debts listed in the order. After that period, those debts are written off entirely.

The eligibility criteria changed significantly in 2024. The maximum debt threshold was raised to £50,000 in June 2024, making DROs accessible to a much wider group of people than before. The application fee was also abolished in April 2024, meaning there is now no cost to apply.

Key facts about DROs:

You can only apply through an approved intermediary, typically a debt adviser at a registered organisation such as Citizens Advice or StepChange.
Your total qualifying debt must not exceed £50,000.
You must have no more than £75 in surplus income per month (after essential expenses).
Your total assets must not exceed £2,000 (with a vehicle worth no more than £4,000).
You cannot apply if you already have another active insolvency arrangement.
A DRO stays on your credit file for six years and is recorded on the Individual Insolvency Register for 15 months.
Certain debts are not covered, including student loans, child maintenance, and court fines.

The removal of the fee and the higher debt limit have made DROs one of the more accessible formal debt solutions for people on lower incomes or receiving benefits.

Bankruptcy

Bankruptcy is a formal insolvency process that can result in most unsecured debts being written off, usually within 12 months. It is applied for through the Insolvency Service’s online adjudicator system rather than through the courts.

The current application fee is £680, paid upfront at the point of application.

Bankruptcy is often seen as a last resort, but it is a legitimate legal process that gives people a route out of serious debt. The reality is more nuanced than its reputation suggests.

Key facts about bankruptcy:

Most unsecured debts are included and written off at the end of the bankruptcy period (typically 12 months).
If you own property, it may need to be sold or your share dealt with. There is a three-year window for the trustee to deal with your interest in a property.
If you have surplus income, you may be required to make payments through an Income Payments Agreement (IPA) lasting up to three years.
Certain professions and roles are affected by bankruptcy, including company directors, solicitors, and some public office holders. Checking whether your employment could be impacted is essential.
Not all debts are covered. Student loans, child maintenance, and debts arising from fraud are among the exclusions.
Bankruptcy stays on your credit file for six years from the date of the order and appears on the Individual Insolvency Register for at least 12 months.
There are restrictions during the bankruptcy period on obtaining credit over £500 without disclosing your bankrupt status.

People who explore bankruptcy often have significant debts with no realistic prospect of repaying them within a reasonable timeframe, and limited assets.

Debt Management Plans (DMPs)

A DMP is an informal arrangement where you make reduced monthly payments to your creditors based on what you can afford. Unlike IVAs and bankruptcy, a DMP is not legally binding on either side.

Key facts about DMPs:

They are usually set up and managed by a DMP provider, which could be a free service (like StepChange or PayPlan) or a fee-charging company.
Because the arrangement is informal, creditors are not obliged to freeze interest or charges, though many do as a goodwill gesture.
There is no fixed end date. The plan continues until the debts are repaid in full or another solution is put in place.
Creditors can still contact you and, technically, could pursue legal action, although this is less common once a DMP is running.
A DMP will affect your credit rating. Reduced payments are typically reported to credit reference agencies.
Free DMP providers do not charge fees for their service. Fee-charging companies take their payment from your monthly contribution, meaning less goes to creditors.

DMPs are often explored by people who can afford to repay their debts over a longer period but need breathing room from the pressure of multiple monthly payments at full contractual rates.

The Breathing Space Scheme

Introduced in May 2021, the Breathing Space scheme (officially called the Debt Respite Scheme) gives people in problem debt legal protections while they work towards a solution. There are two types: Standard Breathing Space and Mental Health Crisis Breathing Space.

Standard Breathing Space lasts 60 days. During this period, creditors must pause all enforcement action, freeze interest and charges, and stop contacting you about the debt. It can only be accessed through a qualified debt adviser.

Mental Health Crisis Breathing Space is available to people receiving treatment for a mental health crisis. It lasts as long as the treatment continues, plus 30 days after it ends.

Key facts about Breathing Space:

It covers most personal debts, including tax debts and benefit overpayments.
You can only access Standard Breathing Space once in any 12-month period.
During Breathing Space, creditors cannot start or continue court action, enforce existing judgments, or petition for bankruptcy against you.
It does not write off any debt. It is a temporary pause designed to give you time to get proper advice and find a longer-term solution.
Ongoing liabilities like council tax for the current year are not covered.

Breathing Space is not a debt solution on its own. Think of it as a protected window that buys time to explore the options listed above without the added pressure of creditor contact and enforcement.

Where to Get Proper Advice

This guide is a starting point, not an endpoint. The right path depends entirely on individual circumstances, and getting proper advice from a regulated professional is the logical next step.

MoneyHelper, backed by the Money and Pensions Service, provides free impartial guidance on dealing with debt: https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt

Other free services include StepChange, Citizens Advice, and National Debtline. All offer confidential support at no charge.

Disclaimer: The content on this page is for general informational purposes only and does not constitute financial, legal, or professional advice. Debt Helper Team is a fact-finding resource and does not provide regulated financial advice. Information is believed to be accurate at the time of writing (March 2026) but rules and thresholds can change. Always seek guidance from a qualified, regulated debt adviser before making any decisions about your finances.