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.
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