IVA or Bankruptcy – understanding the difference

If you’re feeling overwhelmed by debt, you might be considering a formal debt solution. While insolvency is a serious step, it can also be a lifeline – helping you take control and work towards becoming debt-free.

Two common options are Individual Voluntary Arrangements (IVAs) and bankruptcy. Both can write off a portion – or all – of your debts, but they work in different ways.

When is a statutory debt solution right for me?

You may be classed as ‘insolvent’ if:

You can’t pay your debts as they fall due or
You owe more than the value of your assets

In this case, a formal solution like an IVA or bankruptcy may be appropriate. Both are legally binding and can offer a fresh start – but it’s important to get expert advice to make the right choice for your situation.

IVA and bankruptcy – at a glance

Feature	IVA	Bankruptcy
Duration	Typically five years (may be extended to six if you own property)	Usually 12 months (income payments may last up to three years)
Property/home	Protected – may lead to a 12-month extension if equity is present	May be sold if there’s equity
Monthly payments	Fixed monthly payment based on what you can afford	Only required if you have surplus income
Assets (e.g. car, property)	Most assets are retained	Assets may be sold to repay creditors
Employment impact	Fewer restrictions – still eligible for most jobs, but you should double-check	Some jobs may restrict bankruptcy (e.g. financial, legal, director roles)
Credit impact	Stays on your credit file for six years	Stays on your credit file for six years
Public record	Listed on the Insolvency Register only	Listed on the Insolvency Register and may be published in the London Gazette
Cost	Fees included in monthly payments if IVA is approved (learn more about the fees in an IVA)	One-off £680 bankruptcy application fee

Will I lose my home?

In an IVA, your home’s protected. If you have a certain level of equity, your IVA may be extended by 12 months.
In bankruptcy, if there’s enough equity to benefit creditors, the property may be sold. Homes with less than £1,000 of equity may be exempt from sale.

Will an IVA or bankruptcy affect my job?

IVAs don’t usually restrict your employment, but it’s worth double-checking if you have any concerns.
Bankruptcy may affect certain professions such as company directors, financial advisors and some public service roles.

Always check your employment contract or speak to your HR department if you’re unsure.

How will an IVA or bankruptcy affect my credit?

Both IVAs and bankruptcy stay on your credit file for six years from the date they begin.

Talk to a debt advisor first

Every situation is different. What works for one person might not be right for another. Before you make any decisions, it’s vital to get expert, impartial debt advice.

Get debt help online or call us on 0800 316 1833 for a confidential conversation.

FAQs

What if I become seriously ill?

Please contact us as soon as possible. We know these conversations can feel difficult – but you’re not alone, and our dedicated Vulnerability Team is here to support you with care and practical guidance.

Your Insolvency Practitioner (IP) may speak to your creditors and request early completion of your IVA on compassionate grounds.

What happens if I come into money during my IVA?

If you receive a financial windfall – such as inheritance, compensation or lottery winnings – you’ll usually need to pay all of it into your IVA.

Because your creditors have agreed to write off part of your debt at the end of your IVA, any extra funds must be considered.

If the amount’s large, you may be able to offer an early Full and Final settlement.

If friends or family want to help with a lump sum, creditors may accept it as a settlement offer. It doesn’t have to cover everything you owe, but it must be fair and reasonable.

Can I settle my IVA early?

Yes – you can ask to offer a lump sum as a Full and Final settlement.

Your creditors will vote on the offer at a Variation Meeting.
Even if accepted, your IVA stays on your credit file for six years from the original start date.
It remains on the Insolvency Register for three months after completion or termination.

Early settlement can give flexibility, but you’ll still need to rebuild your credit after it completes.

Can I add debts to my IVA?

Because an IVA is a legally binding agreement, adding new debts can be difficult.

Forgotten debts: If a debt was missed at the start, it may still be possible to add it. Sometimes a second Creditors’ Meeting is required if the debt is significant.
New debts: If you’ve taken on new borrowing since your IVA began, contact us immediately. We’ll explain your options and what this means for your arrangement.

Can an IVA affect citizenship?

Your IVA will appear on the Insolvency Register, which may be visible during a citizenship assessment. It doesn’t automatically prevent approval – and in many cases, it reflects that you’re actively managing your debts responsibly.