I am insolvent, what options do I have?

Summary: this article explains what possible options, or outcomes, there may be for someone who is insolvent.

Insolvency is generally where an individual's assets are not sufficient to cover their debt, and their monthly income is not enough to cover essential expenditure and debt repayments. Anyone who finds themselves in this position is generally faced with 3 outcomes depending on their personal and financial circumstances.

Individual Voluntary Arrangement (IVA)

An IVA is usually suited to those within the region of £10,000 or more of unsecured debt, who are insolvent, and have at least 3 lines of credit (e.g. overdraft, loan, credit card) split between at least 2 creditors (e.g. bank, credit card provider). An IVA allows the individual to repay a fixed monthly payment that is split between creditors. The amount is based on what can reasonably be afforded after essential expenditure, such as mortgage repayments, bills etc. An IVA will usually last for 5 years, after which time, any remaining debt will usually be cleared.

Debt Relief Order (DRO)

A DRO is aimed at those on a low income, with no more than around £15,000 of unsecured debt. They must also have no more an £50 left each month after essential expenditure, and assets and savings generally cannot total more than £300. A DRO usually lasts for 12 months, during which time, debt repayments cease. After the 12 months, any debt is cleared (assuming there is no change to financial circumstances in that time). During the 12 months, there are some restrictions placed on the individual, including a limit on obtaining further credit, as well as possible implications on employment.


Often seen as a 'last resort', an individual could be declared bankrupt as a result of a petition to the courts by the unpaid creditors or by the individual themselves. For an individual to declare themselves bankrupt there is a cost involved that is in the region of £700. Bankruptcy restrictions usually last for 12 months, after which time, outstanding debt may be cleared, but details will remain on the individual’s credit record for a period of 6 years, which could impact on gaining future credit, including a mortgage, as well as potential employment. The main risk associated with bankruptcy is that any assets owned by the individual may have to be sold in order to repay some of the debt; this could include the individual’s home.

In all of the above outcomes of insolvency, the individual’s details will be recorded on the insolvency register, which is a publically available record, until the IVA, DRO or Bankruptcy is completed/discharged. Details will also be recorded on the individual’s credit record, usually for a period of 6 years from the start of the outcome. This will have a impact on gaining future credit and/or a mortgage, and could also have a impact on employment in certain professions.