IVA or DRO

An Individual Voluntary Arrangement (IVA) is a way for you to manage your debts if you can afford to make a payment each month. It’s an agreement between you and the companies you owe money to.

A Debt Relief Order (DRO) is a solution for managing debt if you can’t afford payments or can only afford a small amount each month.

If you choose to go ahead with an IVA, PayPlan Partnership Limited (or PayPlan Bespoke Solutions Limited if you’re self-employed) will write an offer to your lenders and arrange a date for them to decide whether they accept or reject your offer. 

They don’t all need to agree for your plan to go ahead. As long as 75% of the money you owe sits with companies who vote yes, your IVA will be approved.

Once approved, you’ll need to make your monthly payments for the agreed amount of time.

If your IVA doesn’t go ahead for any reason, we’ll help you find another way to manage your accounts. 

If you’re eligible for a DRO, you’ll need to speak with an approved intermediary and provide them with a copy of who you owe money to, how much you owe, details of your possessions and a copy of your budget.

You won’t need to attend court to apply for your DRO. Your approved intermediary will submit your application. 

You won’t have to make any payments into your DRO.

Your DRO will last for 12 months, and the Insolvency Service will manage it. You’ll need to keep them updated throughout your DRO. If your situation improves and you don’t meet the DRO criteria, your DRO may be revoked, meaning you’d be liable for your debts plus any accrued interest and charges. 

Most people who enter an IVA with PayPlan Partnership Limited or PayPlan Bespoke Solutions Limited meet the following criteria:

• Generally owe at least £7,000 to two or more creditors. But it can be less.
• Able to pay at least £50 a month for the duration of their plan.
• Have a regular income from employment, benefits or pensions. 

However, it’s important to remember that it’s a flexible solution so you might still be eligible for an IVA if you meet some but not all of the above.

DROs have strict eligibility criteria. You must:

• Owe £50,000 or less to unsecured debts.
• Have assets worth £2,000 or less, excluding essential household items.
• If you have a car, it must be worth less than £4,000.
• Have £75 or less available to pay your debts each month.
• Not be a homeowner.
• Currently live in England, Wales, or Northern Ireland, or have lived and worked in England, Wales or Northern Ireland in the last three years.

An IVA will show on your credit report for six years after its approval date. This means you could find it harder to borrow or be offered higher interest rates if you apply for credit cards, loans, mortgages or other credit in future.

Your DRO will appear on your credit report for six years after its approval date. This means you could find it harder to borrow or be offered higher interest rates if you apply for credit cards, loans, mortgages or other credit in future.

In an IVA, you’ll make monthly affordable payments for an agreed amount of time. 

With a DRO, you won’t make any payments to the companies you owe money to or the Insolvency Service.

An IVA usually lasts for five years, but it can take a little longer if you’re a homeowner.

A DRO takes 12 months to complete. This time is called a “moratorium”. 

At the end of your IVA, any outstanding debts that were included in your IVA will be written off.

At the end of your DRO, any outstanding debts that were included in your DRO will be written off.

All IVA companies charge fees for the set-up and management of your plan. The fees you pay will be taken out of your monthly payments, so the companies you owe money to agree to receive less in exchange for managing your plan. 

The Insolvency Service doesn’t charge a fee for the set-up or management of a DRO.

As soon as your IVA is approved, your creditors will freeze your interest and charges and agree not to take legal action against you. 

Your creditors won’t chase you for payments in an IVA.

You’ll still receive automated letters and emails from them in the first few months. It’s usually nothing to worry about. Once they’ve updated their systems, you’ll only receive annual statements.

In a DRO, your creditors will freeze interest and charges and not take legal action against you.

Your creditors won’t chase you for payments in a DRO.

You might still receive contact from them while your DRO is being set up and they update their systems. After this, you’ll only receive letters or emails they legally must send you.

Yes. Our team will work with you to create a budget based on your current circumstances.

If something changes, you can update it with them. If not, they’ll complete a review with you annually to make sure it’s up-to-date and covers everything.

You’ll have peace of mind knowing that you’ve got enough money to run your home, pay for your household costs and pay your essential bills.

You’ll agree to stick to your budget and any spending restrictions as part of your agreement. And, in return, your lenders will agree to write off any outstanding debt at the end of your plan. 

Yes. Our team will work with you to create a budget based on your current circumstances. 

You can use this to help you complete your DRO application. The Official Receiver will review your submitted budget against their guidelines and make any necessary changes. 

With your budget, you’ll have enough money to run your home, pay your household costs and essential bills.

You must notify the Insolvency Service of any changes to your budget or situation while you’re in a DRO.

If you have a significant change to your circumstances or fail to let the Insolvency Service know of a change, your DRO could be revoked and any debts reinstated with accrued interest and charges.

Once you’ve successfully completed your DRO, any outstanding debts will be written off.

An IVA protects household items (such as furniture, TVs, books and clothing) – you won’t be asked to sell any of these.

Your plan will always protect your possessions unless you agree to sell them. If you have any individual items that aren’t household items, make sure to let PayPlan Partnership Limited or PayPlan Bespoke Solutions Limited know so they can let you know the best way to protect them. If you don’t make them aware, they could be at risk.

A DRO protects household items (such as furniture, TVs, phones, books and clothing) and you won’t be asked to sell them.

You won’t be eligible for a DRO if you have any non-essential items over £2,000.

Your home and equity will be protected in an IVA. Depending on your circumstances, you might be asked to release equity in the last year of your plan. However, in our experience, it’s really unlikely that you’ll be able to do so. So, your plan will be extended for up to 12 months. 

You won’t be eligible for a DRO if you’re a homeowner or named on a mortgage.

It’s unlikely that an IVA will affect an existing tenancy agreement.

If you have current rent arrears, you can protect your tenancy agreement by prioritising a payment to these in your budget. If you choose to include these in your plan, we recommend checking your tenancy agreement or with your landlord to see how this could affect you.

If you’re applying for a new tenancy agreement for a privately rented property, we’d recommend checking with a letting agent or landlord to see how this might affect you. 

Usually, a DRO won’t affect an existing tenancy agreement.

If you have rent arrears for your current property, it’s essential to know that these will be included in your DRO. Some landlords may choose to evict you if this breaks the terms of your rental agreement.

If you’re applying for a new tenancy agreement for a privately rented property, we’d recommend checking with a letting agent or landlord to see how this might affect you.

You’ll get to keep your car in your IVA unless you agree to sell it. 

You’ll have enough money to pay for the running costs and keep it roadworthy.

If your car is on a finance agreement, your budget will prioritise your car payment. You’ll need to continue to pay this outside of your plan.

Some finance agreements will be terminated upon entering a form of insolvency. In our experience, this rarely happens in an IVA and is more common in bankruptcy or Debt Relief Orders. We’d recommend checking your contract to see if this will be impacted.

You could be asked to downsize if you own your car outright with a high resale value.

You’re in control of your plan, and you’ll need to agree to it. If there’s anything you’re not happy with, you don’t have to go ahead with it. 

If your current vehicle is valued at under £4,000, you’ll get to keep your car in a DRO.

Your vehicle will be valued online using a valuation site recommended by the Insolvency Service. You won’t be eligible for a DRO if it’s worth more than £4,000. An approved intermediary can discuss this with you in more detail.

Entering a DRO can break the terms of some finance agreements. If you’ve got a vehicle on finance, check your agreement before submitting your application.

In an IVA, you can continue running your business as usual. 

Our team will work with you to create a business cashflow to help you understand your personal and business expenses.

Your IVA will help you to protect your business and stay in control of your livelihood. You’ll keep any tools, machinery and stock necessary to run your business.

If you’re a Director of a Limited Company, you’ll need permission from the court to continue trading. If you’re self-employed but not a Director, you can continue trading.

If you’re self-employed and have tools, machinery or stock needed to run your business, your plan will protect these.

You may not be eligible for a DRO if any of these are of excess quantity or value.

You can apply for credit for necessary purposes, such as for a new car or a re-mortgage, while you’re in an IVA, but it’ll need to be approved by your Insolvency Practitioner. You’ll need permission to take out credit over £500.

In a DRO, you’ll need permission to take out any additional credit over £500. You’ll also need to disclose to the lender that you’re in a DRO.

The details of your IVA will be listed on the public Insolvency Register for the duration of your plan. 

The details of your DRO will be listed on the public Insolvency Register for the duration of your DRO.