We'll help you decide between an IVA and bankruptcy
Comparing an IVA with bankruptcy in general terms only goes so far. What matters is how each would affect you. IndividualVoluntaryArrangements.net offers a free, confidential conversation in which we look at your home, income, job and debts, and explain the real differences between the two in your case.
You'll know what you'd pay, how long it would last and what you'd be risking under each option before you commit to either.
What you'll come away with
- A clear comparison based on your own figures
- An understanding of the risks to your home and job
- Time to decide, with no pressure from us
The main trade-off: an IVA usually lasts longer, but lets you keep control of your home and assets. Bankruptcy is usually quicker, but your assets can be sold and more restrictions apply.
IVA and bankruptcy side by side
| IVA | Bankruptcy | |
|---|---|---|
| Length | Usually 5 years (6 if equity can't be released) | Usually discharged after 12 months; income payments can last up to 3 years |
| Upfront cost | None in most cases; fees come from your payments | £680 application fee |
| Your home | Usually kept; equity may need releasing near the end | Your share of equity may be used to repay creditors; home can be sold |
| Other assets | Usually kept, including a reasonable car | Valuable assets can be sold |
| Creditor approval | Needed: 75% by value of those voting | Not needed |
| Credit file | 6 years | 6 years |
| Insolvency Register | Yes, until 3 months after completion | Yes; bankruptcy restrictions orders can extend this |
| Job restrictions | Few, but some professions affected | More, including acting as a company director |
| Self-employed | Usually can keep trading | Business may need to close |
When an IVA may suit you better than bankruptcy
- You own your home and want to protect it.
- You have a regular income and can afford a reasonable monthly payment.
- Your job could be affected by bankruptcy.
- You're self-employed and want to keep trading.
When bankruptcy may be better
- You have little or no spare income.
- You don't own your home or have valuable assets.
- Your debts are very large compared to your income.
- You want the quickest route to a fresh start and don't qualify for a DRO.
Neither option is automatically better. A good adviser will look at your full circumstances and explain the consequences of each. See all options on our debt solutions page.
What does each option cost over time?
The figures below are a simplified illustration for someone with £30,000 of unsecured debt and £150 a month of spare income. Real outcomes depend on your circumstances.
| IVA | Bankruptcy | |
|---|---|---|
| Upfront cost | None | £680 |
| Monthly payments | £150 for 60 months | Up to £150 for 36 months under an income payments arrangement |
| Total paid | £9,000, with fees taken from this | Up to £6,080, including the fee |
| Assets at risk | Usually only equity near the end | Equity in your home and valuable assets |
On payments alone, bankruptcy can look cheaper. For homeowners, the loss of equity can change that picture completely. So compare the options using your own figures.
How does each option affect my job?
Bankruptcy has more effect on employment than an IVA. While bankrupt, you can't act as a company director without court permission, and some professions, including roles in law, accountancy and financial services, have rules about bankruptcy. An IVA has fewer formal restrictions, although some employers and professional bodies still ask you to declare it. Check your contract or professional guidance before deciding.
Can I change my mind later?
If an IVA fails, bankruptcy is still possible afterwards. Bankruptcy, however, is very difficult to undo once a bankruptcy order is made. Annulment is only possible in limited circumstances, such as when all debts and costs are paid in full. That's one reason to look carefully at the alternatives before applying.
Which is better if you rent and have no assets?
If you rent, have no significant savings or valuables and your income is modest, bankruptcy may be quicker and cheaper than an IVA, because there's little for the trustee to sell. If your income is very low and your debts are under £50,000, a Debt Relief Order may be better still, with no fee at all. An IVA tends to make most sense for tenants who have a steady surplus and a job that bankruptcy would affect.
Which is better if you're self-employed?
For most self-employed people who want to keep working, an IVA is the better fit. It lets you keep trading and keep the equipment you need, with your contribution based on your profits. Bankruptcy usually means your business stops, and business assets can be sold. If your business has no future, bankruptcy may still be the right route, but compare both first.
How do creditors view each option?
An IVA needs creditors to agree, so the proposal has to offer them a fair return compared with bankruptcy. That's why your proposal will usually show how much creditors could expect under each option. Bankruptcy doesn't need creditor approval, although creditors can be involved in the process.
Is there a third option?
Yes. A Debt Relief Order is available to people with low income and few assets, and a Debt Management Plan can work if you can repay in full over time. We'll always look at these alongside an IVA and bankruptcy.
Making the decision with us
If you're weighing up an IVA and bankruptcy, send us an enquiry using the form at the top of the page. We'll go through your home, income, job and debts and explain how each option would affect you, with no pressure to choose either.
It helps to have a rough idea of your home's value, your mortgage balance and the value of any car or savings when we speak. Those figures make the comparison much clearer. You can also read our separate guides to bankruptcy and IVAs and your home beforehand.