Unsecured debt is not tied to an asset. Examples include credit cards, personal loans, and payday loans. Secured debt is tied to an asset you own, like your home (mortgage) or car. If you fail to make payments on a secured debt, the creditor can take the asset.

Yes, formal solutions like an **Individual Voluntary Arrangement (IVA)** or **Debt Relief Order (DRO)** can write off a significant portion of your unsecured debts. The amount written off depends on your financial situation and the specific solution you choose.

Yes, all formal debt solutions will have an impact on your credit rating. They are designed to help you, but they are recorded on your credit file for a period of time, typically six years. This can make it more difficult to obtain new credit in the short term. However, for many people who are already struggling, this is a necessary step toward long-term financial health.

An IVA is a legally binding agreement between you and your creditors. You make a single, affordable monthly payment, usually for five or six years, after which any remaining unsecured debt is legally written off. It protects you from creditor contact and legal action.

An IVA is typically for people in England, Wales, and Northern Ireland who have **£6,000 or more in unsecured debt** and can afford to make a single monthly payment, but not enough to clear their debts within a reasonable timeframe. It is a good alternative to bankruptcy.

A DMP is an informal agreement between you and your creditors to pay off your debts with a single, manageable monthly payment. While not legally binding, most creditors will agree to freeze interest and charges and stop collection activity as long as you keep up with the plan.

A DMP is **informal and flexible**, whereas an IVA is **legally binding**. A DMP doesn’t write off debt and you will pay back the full amount, but you can change or cancel the plan if your circumstances change. An IVA offers legal protection and debt write-off, but it is a more rigid, long-term commitment.

Debt consolidation involves taking out a new loan to pay off multiple existing debts. This simplifies your finances by leaving you with just one monthly payment, often at a lower interest rate, which can make your debt more manageable.

It can be a good option if you have a decent credit score and can secure a loan with a lower interest rate than your current debts. However, if you are struggling with payments, a formal solution like a DMP or IVA might be a better choice to prevent legal action and get your debt under control.

A DRO is a form of insolvency for people who have low income and few assets. It stops creditors from taking action and freezes your debts for 12 months. If your financial situation hasn’t improved after this period, the debts are completely written off.

To be eligible for a DRO, you must have:

• Unsecured debts of less than **£50,000**.
• Assets valued at less than **£2,000**.
• A monthly disposable income of less than **£75**.
• Not been granted a DRO in the last six years.
• Live or worked in England or Wales within the last 3 years.

Bankruptcy is a legal process for dealing with debts you cannot pay. It is a serious option that often results in your unsecured debts being written off, but it can also involve selling valuable assets and will have a significant impact on your credit rating.

While bankruptcy provides a fresh start, it comes with restrictions. You may have to sell your home or car, and it will be on your credit file for six years. It can also affect your job and ability to be a company director or hold certain public offices.

Breathing Space is a government scheme that provides people in problem debt with a 60-day period of legal protection from their creditors. During this time, creditors cannot add interest or charges, or take any enforcement action. It gives you time to get professional debt advice without the pressure of collections.

You cannot apply for Breathing Space on your own. You must apply through a qualified debt adviser, who will assess your situation and determine your eligibility for the scheme.