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Debt solutions that provide debt write-off

Posted 13 March 2017

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Debt solutions that provide debt write-off and how they work.

There are some debt solutions that provide debt write-off. This means that, once you successfully complete one of them, any outstanding debt you have at the end will be wiped away completely. It’s also worth saying that in some special circumstances, you might be able to get debt written off without having to start a debt solution, for example if you suffer from a serious medical condition.

There are a range of debt solutions available and each one is designed to help in a slightly different kind of situation. They all involve changing your original repayment plan that you signed when you first took the credit out, but not all of them provide debt write-off.

In this blog we’re going to have a look at the ones that do and what these types of plan involve.

The solutions

The debt solutions that provide debt write-off are Individual Voluntary Arrangements (IVAs), Bankruptcy and Debt Relief Orders (DROs). These solutions are only available in England, Wales and Northern Ireland. There are also debt solutions available in Scotland that can write debt off. To find out more about these, just click the link to our Scottish solutions page.

Before we look at each of these solutions in a bit more detail, it’s important to say that all debt solutions will have a negative impact on your credit rating. If you start a formal solution, it will stay on your credit file for six years from the date that you start it and this may make borrowing, or being approved for certain services, more difficult in the future.

Individual Voluntary Arrangements

First, let’s look into IVAs. An IVA is a formal plan that you agree with your unsecured creditors to pay back some, but not all of what you owe. An IVA lasts for five to six years and during that time you pay a lower, affordable amount to your creditors each month to bring the balance of your debts down.

As long as you stick to the rules of the IVA, the rest of your debt included on the plan will be written off when it finishes and this includes interest and charges. You’re only allowed to include unsecured debts on an IVA but your monthly payments will be worked out so that you can still afford your other essential payments, like any ongoing bills and secured debts.

There are rules about what must be paid into the IVA. For example, if you are a homeowner, you may be expected to release equity and put the money into the IVA during the last year of the solution. If you’re not able to do this, then your IVA will simply be extended for up to another twelve months. In some cases you have to put additional monies you earn into the IVA from any overtime, bonuses or commission you get.


Next, let’s look into Bankruptcy. Bankruptcy can have serious effects on your life, for instance, your assets would be at risk with bankruptcy. Having said that, it can sometimes be the best option for some people struggling with debt and it does provide debt write-off.

Bankruptcy lasts for a year and during that time your financial affairs are handled by a Trustee. They decide whether you can afford to make payments to your unsecured lenders while your bankruptcy is going on, known as an Income Payment Agreement (IPA). However, you will never be expected to make these payments if your income was made up solely of state benefits.

Whether you have an IPA or not, at the end of your bankruptcy the rest of your debts included on the plan will be written off.

The cost of going bankrupt is £680 in total. You can apply for bankruptcy without going to court and you can pay in instalments, but your application won’t be processed until the fee has been paid in full. You should speak to a trained debt advisor first and make sure it’s the right option for you before you apply.

Debt Relief Orders

And finally, let’s explore how DROs work. They were created to help people who are struggling the most to repay their debts. A DRO also lasts for a year and during that time your repayments towards your unsecured debts are completely suspended so you don’t have to pay anything towards them at all. If your financial situation has not improved after a year, then anything you owe will be written off.

The qualifying criteria for a DRO is quite strict, to make sure it’s there to help those that really need it. You have to be able to show that you have less than £50 in disposable income each month. So that means income available to put towards your debts after your essential bills have been paid. You also can’t have assets worth more than £1,000 – so this solution is not available to homeowners. Your car is looked at separately and also can’t be worth more than £1,000. You won’t qualify for a DRO if you have more than £20,000 in debt.

Which debt solution is right for me?

Just because there are solutions that provide debt write-off, it doesn’t mean that one of them will necessarily be right for you. For example, a debt advisor might recommend that you start a Debt Management Plan rather than an IVA because of your specific level of debt or because your job happens to be incompatible with an IVA. Or you might find that making tweaks here and there to your budget allows you to manage all your repayments and bills.

You need to speak to a trained debt advisor to find out which debt solution is right for you. This is very important because starting the wrong debt solution could have a detrimental effect on your life.

You can contact one of our advisors using the options at the top of the page. They are ready and willing to have an in depth chat about your situation and find the best solution for you. After you’ve spoken to them, you’ll know why a particular solution is right for your circumstances and how to move forward.


by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.