Certainly recent changes to laws relating to bankruptcy, notably the Enterprise Act of 2002, have made it easier for individuals to declare themselves bankrupt. And whereas before you remained in a state of bankruptcy for up to three years, you are now most likely to be discharged in just 12 months.

But even so, bankruptcy is not an easy option and even if you are discharged after a year that doesn't mean an end to the story.

Bankruptcy is just one option facing you if you are in a serious amount of debt and it makes sense for you to consider other options, preferably with the help of professional advice.

Here are your alternatives:

Enter into an informal arrangement with your creditors

You may not even have to go to court at all if you can enter into an informal arrangement with your creditors. You can write to your creditors, explaining your financial situation and asking for a compromise to be reached over your debt repayment.

This could involve freezing any interest being added to unpaid amounts, paying the debt back in smaller amounts over a longer period or not having to pay the full amount due.

Enter into an Individual Voluntary Arrangement

This is basically a formal version of the above arrangement. You would need to apply to the court with the help of an authorised insolvency practitioner who would supervise the arrangement and payments made to your creditors as per the terms of the agreement made.

Unlike an informal arrangement, an IVA is legally binding on both parties.

Administration order

If one or more of your creditors has a court judgment against you and if your total debts are £5,000 or less, a county court in England or Wales could make an administration order.

Under the administration order, you make regular payments to the court, which will then pay your creditors.

While you are paying the administration order, your creditors can't take any further action against you to get their money, without asking the court first.

Also, you will not have to pay any interest on your debts.

You will have to pay a fee for an administration order, but this will be added to the money you already owe and not charged separately.

Debt relief order

A Debt Relief Order (DRO) is a new alternative to bankruptcy that can be applied for from the 6th of April 2009 if you meet the DRO criteria.

Debt Relief Orders are for those who do not own their own home, have little in the way of assets or surplus income and owe less than £15,000. They are suitable for people who do not own their own home, have little surplus income and assets and less than £15,000 of debt.

A DRO does not involve going to court. Instead they are run by The Insolvency Service in partnership with skilled debt advisers who are called approved intermediaries. A DRO lasts for 12 months and during that period creditors named on the order cannot take any action to recover their money without permission from the court.


If you are a UK resident and want to speak to a trained debt counsellor who can advise you on an IVA and alternatives to bankruptcy, please fill in the form below. This is the first step towards solving your debt problems and will only take a minute or two of your time.