If you are in the unfortunate position of having more outgoings than income, you really do have a financial problem that you have to address. Traditionally, those earning less than their living expenses and struggling with excessive debts might have been forced into bankruptcy. However, this is no longer the case as there are alternatives to bankruptcy available for some people struggling with debts in the UK.

The most popular alternative to bankruptcy is the IVA. An IVA holds in place an agreement between the debtor and their creditors that the repayment plan is restructured to decrease the burden on the debtor and make creditors receiving payments a more realistic scenario. The agreement is legally bound and the debtor is now faced with a manageable single monthly payment which is calculated based on their incomings and current financial state. The debtor is informed how long these payments will continue for, usually for 5 years, and at that point, the debtor is relieved of all debt.

The Debt Management Plan is a similar thing really. However, it is not legally binding and is more informal in nature. Whereas an IVA must be organised by a licensed Insolvency Practitioner, the Debt Management Plan does not have to be. However, it does involve a renegotiation of the repayment terms and a payment calculated based on what the debtor can afford.

The Debt Relief Order is a third bankruptcy alternative. This is another legal alternative and again is completed through the Insolvency Service. However, where an IVA and Debt Management Plan require a monthly payment over a set period of time, the Debt Relief Order does not. The DRO, as it is abbreviated, is aimed at those who really cannot afford to make repayments on any of their debts. It's for those whose assets do not exceed 300 in value and who have less than 50 of disposable income left after their expenses have gone out. It lasts a year, during which the debtor need not make any payments and at the end of which they are considered to have settled all debts that were included on the order. However, if their personal circumstances change at any time during the DRO, for example their salary increases or they receive money from another means, they must declare it.

These are not the only alternatives, but are the most common here in the UK. While the list is not exhaustive it proves a point: bankruptcy is no longer the only option for those suffering personal insolvency.

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