Comparison of debt solutions
Trying to decide which debt solution is right for you can be confusing. The following table gives a summary of the options available in England and Wales and shows how they compare to each other.
| Consolidation loan | Financial Management Plan |
Individual Voluntary Arrangement |
Debt Relief Order | Bankruptcy | |
| Debts cleared after an set period ? | Yes. | No | Yes | Yes (subject to certain exceptions) | Yes (subject to certain exceptions) |
| Interest Frozen and charges stopped? | No | Sometimes | Yes | Yes | Yes |
| Automatically binding on all unsecured creditors? | Only on creditors paid in full | No | Yes | Yes, but only on creditors included in your application form |
Yes |
| Automatic protection from action by unsecured creditors? | Only from creditors paid in full | No | Yes | Yes | Yes |
| Protection from action by secured creditors? | No | No | No | Those with significant equity do not qualify for a DRO | No |
| Length of time? | Repayment period of the loan | No fixed time | Usually 5 years | Usually 1 year | Usually 1 year but you may have to make payments from your income for up to 3 years |
| Effect on employment? | Probably none | Probably none | Possibly | Possibly | Possibly |
| Home at risk? | No, but you need to keep up mortgage/ or rent payments | No, but you need to keep up mortgage/ or rent payments | Possible | homeowners will not qualify for a DRO | Yes |
| Minimum or maximum amount owed? | N/A | Min £2,000 | In practice min debt about £12,000 | Max debt 15,000 | No minimum if it is your own petition (£750 if the petition is by a creditor) |
| What types of unsecured debts are allowed? | Any | Any | Any, but in practice same as for bankruptcy | Any, but in practice same as for bankruptcy | Most, with certain exceptions |
| Credit rating affected? | Possibly | Yes | Yes | Yes | Yes |