Consumer Debt - options of last resort

Consumer Debt - options of last resort
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In the UK, bankruptcy and debt forgiveness options should be considered as last resorts due to their potential consequences. However, understanding them can be helpful for individuals facing overwhelming debt and considering all their options. Here's an overview:


Individual Bankruptcy (England & Wales):
 This option allows individuals to write off most debts after a 12-month bankruptcy order. However, it comes with significant implications like asset restrictions, travel bans, and negative credit ratings for up to 6 years.

Sequestration (Scotland): Similar to Individual Bankruptcy, but with slightly different procedures and consequences.

  • Types: There are two main types of bankruptcy in the UK:
    • Individual Voluntary Arrangement (IVA): A legally binding agreement with your creditors to repay a portion of your debts over a fixed period (5-6 years). This allows you to avoid formal bankruptcy while offering some debt relief.
    • Bankruptcy Order: A court order that allows you to write off most of your unsecured debt. However, it comes with significant consequences, including:
      • Credit rating damage: Your credit rating will be severely impacted for at least 6 years, making it difficult to borrow money in the future.
      • Asset restrictions: You may be required to sell some assets to repay your creditors.
      • Travel restrictions: You may be restricted from leaving the country without permission.
      • Employment implications: Some employers may be reluctant to hire someone with a bankruptcy history.

Debt Forgiveness:

  • Debt Relief Order (DRO): This option is available for individuals with low income and minimal assets (under £30,000 debt and £750 disposable income). A DRO writes off certain unsecured debts after a year. However, it also has consequences:
    • Credit rating damage: Similar to bankruptcy, your credit rating will be negatively impacted for 6 years.
    • Future borrowing restrictions: You may be restricted from borrowing more than £500 for the next 12 months.
    • Public record: Your DRO will be listed on a public register for 6 years.
  • Debt Management Plan (DMP): While not technically debt forgiveness, a DMP can help manage and reduce debt through negotiated repayment plans with creditors. It doesn't write off any debt, but can provide a sustainable way to become debt-free over time.


  • Bankruptcy: Specific income and asset thresholds must be met. You cannot have previously declared bankruptcy in the past 12 years.
  • DRO: Strict income and asset limits apply. You cannot have previously applied for a DRO within the past 6 years.
  • DMP: No specific income or asset criteria, but your debt situation must be unsustainable with regular repayments.


  • Bankruptcy: Restrictions on borrowing, travel bans, and negative impact on credit ratings. Assets may be sold to repay creditors.
  • DRO: Limitations on future borrowing and negative impact on credit ratings.
  • DMP: No asset restrictions or travel bans, but credit rating may be impacted.

Important Considerations:

  • Seek professional advice: Before considering bankruptcy or debt forgiveness, it's crucial to seek professional financial advice from organizations like StepChange, National Debtline, or Citizens Advice. They can assess your situation, explain the consequences of each option, and suggest alternative solutions that may be more suitable.
  • Not a quick fix: Both bankruptcy and debt forgiveness options have long-lasting consequences that can impact your life for several years. They should only be considered as a last resort after exploring all other possibilities.
  • Alternatives: Depending on your circumstances, there might be other debt management solutions like DMPs, consolidation loans, or negotiating with creditors that can help you manage your debt without resorting to bankruptcy or debt forgiveness.

Remember, dealing with debt can be stressful, and there is no shame in seeking help. Resources and support are available to guide you through your options and make informed decisions for your financial well-being.

Additional Resources:

The Insolvency Service:


National Debtline: 

Citizens Advice: 

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