We think the most useful thing we can do is help you find the right solution, even when that isn't an IVA. This page explains when an IVA can work on a modest income and when a cheaper, quicker option makes more sense.
Why a Debt Relief Order is often a better fit
A Debt Relief Order (DRO) is designed for people with low income and few assets. It lasts twelve months, there's no fee, and at the end the debts included are written off. You may qualify if:
- Your debts total less than £50,000.
- You have less than £75 a month left after essential costs.
- Your assets are worth less than £2,000, and any vehicle is worth less than £4,000.
- You generally don't own your home.
- You haven't had a DRO in the last six years.
If that describes you, a DRO is usually better than a five-year IVA. You apply through an approved intermediary, a type of debt adviser, and free advice services can do this for you. Read more about Debt Relief Orders.
How long a DRO takes to arrange
Once an adviser has your details and documents, the application itself is made online and is often decided within days. The time-consuming part is usually gathering statements and working out your budget, so start collecting paperwork early if you live in Bishop Auckland and are thinking of applying.
When an IVA can still work on a modest income
An IVA doesn't need a high salary. It needs a steady income and a regular surplus once essential costs are paid. Creditors generally expect a contribution of at least around £80 to £100 a month. An IVA may suit you better than a DRO if:
- You own your home and want to protect it, as DROs aren't usually available to homeowners.
- Your debts are over £50,000.
- You have more than £75 a month spare but can't repay everything in full.
- You own a vehicle worth £4,000 or more that you need for work.
Universal Credit and your IVA budget
Many households in Bishop Auckland receive Universal Credit, either on its own or topping up wages. It counts as income in an IVA, but because it changes with your earnings each month, your budget needs to reflect how it really behaves.
The housing element and your rent
If part of your Universal Credit covers your rent, the full rent goes into your budget as an essential cost, and the housing element goes into your income. Make sure any shortfall between the two is shown clearly.
Deductions for advances and overpayments
If money is being deducted from your Universal Credit to repay an advance or an overpayment, use the amount you actually receive. The rules on these deductions during a debt solution are complicated, so mention them at the start.
Keeping the heating on: energy debt and prepayment meters
Older stone and brick terraces in Bishop Auckland can be expensive to heat. If you've fallen behind with energy bills and been moved to a prepayment meter, part of every top-up may be going towards the arrears. Energy arrears can be included in an IVA or DRO, and once that happens the extra recovery through your meter should stop. If you're struggling to top up at all, contact your supplier, as they have obligations to help customers in difficulty.
Caring responsibilities and disability benefits
If you care for someone, or you or a family member has a disability, your budget needs to reflect it. Carer's Allowance, Personal Independence Payment and similar benefits count as income, but the extra costs that come with disability or caring, such as higher heating, specialist food, taxis to appointments or equipment, are essential spending too. Don't leave them out because they feel unusual. A budget that ignores them won't last five years, and creditors accept genuine additional costs when they're explained.
Many families in Bishop Auckland juggle work with caring for an older relative. If that's you, and your hours are limited as a result, a DRO may again be the simpler choice.
Council tax support from Durham County Council
Bishop Auckland is in County Durham, so your council tax goes to Durham County Council. If you're on a low income, check whether you qualify for council tax reduction, which can reduce your bill significantly. Arrears can usually be included in a DRO or IVA, but you'll need to keep paying the current year's bill.
Jobs and income in the town
The regeneration work led by The Auckland Project around Auckland Castle and the Market Place has added jobs in hospitality and heritage, many of them part-time or seasonal. Part-time and seasonal wages can still support an IVA if they're steady across the year, but if your hours vary a lot, a more flexible solution may be safer.
Free help in Bishop Auckland
Free, impartial advice is available from Citizens Advice County Durham and from MoneyHelper, including help to apply for a DRO. You don't have to pay anyone for debt advice, and you can get help from Bishop Auckland by phone or online without travelling.
If you'd like to talk about whether an IVA could work for you, our team, based in Newcastle, handles enquiries by phone and email, so you don't need to travel. Send the form at the top of the page. If a DRO or another option looks more suitable, we'll tell you.
Questions about low-income debt solutions
Can I get a DRO if I work?
Yes. Working doesn't stop you getting a DRO. What matters is that you have less than £75 a month left after essential costs.
Do I have to travel to Bishop Auckland or Durham to apply?
No. DRO applications and IVAs can both be arranged by phone and online, so you won't need to travel.
Will a DRO or IVA affect my Universal Credit?
No. Your entitlement to Universal Credit isn't affected by entering a debt solution.
What if my circumstances improve during a DRO?
If your income rises significantly or you receive a windfall, the DRO may be revoked. Report changes promptly.