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Debt Solutions Compared

Different Debt Solutions and How they work

The contrast between Bankruptcy and a Debt Management Plan is startling in terms of what creditors can expect to receive from borrowers who encounter financial difficulties.

People who enter a Debt Management Plan can expect to be making payments to their creditors for many years if they are to repay the debt in full, although some creditors may agree to reduce or forego interest and penalties. Nevertheless although a Debt Management Plan can be a relatively attractive solution for creditors the long duration can be a disadvantage for the hard-pressed borrower.

Borrowers who become insolvent and who declare themselves bankrupt or who are bankrupted by a creditor on the other hand can expect to be discharged from bankruptcy within one year although they may have to make contributions for up to three years via an income payments order. Creditors however will frequently receive little or nothing from the estate of a bankrupt when the fees and costs of bankruptcy are paid.

The alternative to Bankruptcy and Debt Management: The IVA


Although it looks like a case of all (in a Debt Management Plan) or nothing (in Bankruptcy) for creditors, there is a third way. An Individual Voluntary Arrangement (IVA) will usually yield a reasonable dividend for creditors who can expect a substantial portion of the borrower’s debts to be repaid in a reasonable time frame. Most IVAs last for five years but the term can be considerably shorter if a lump sum settlement is agreed. In a minority of cases the IVA may run for a bit longer than five years but this is exceptional. Interest and penalties on debts are frozen by law and repayment of between 20% and 40% of the debt frequently occurs although in certain circumstances creditors may accept repayment of less than 20% and in a small number of cases up to 100% of the debt may be repaid.

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Fees and key info

We are happy to provide you with debt advice only. We only charge a fee if you opt for one of our debt solutions. Fees will depend on which debt solution we provide and what your personal circumstances are. All fees will be discussed prior to commencement of any service or debt repayment plan. Click here to read our fees and key info. Please note: From time to time we may refer you to other services providers or charities such as the CAB.


If you’d like more information on other sources of free debt help and advice you can visit MoneyHelper – an organisation, backed by government and set up to offer free and impartial advice to those in debt. - Click here to visit MoneyHelper