IVA vs Bankruptcy: Compare Insolvency Options

Understanding the critical differences between Individual Voluntary Arrangements and Bankruptcy to make the right choice for your financial future.

⚠️

Important: Both Are Serious Insolvency Solutions

IVAs and Bankruptcy are formal insolvency procedures with long-lasting consequences. Both will damage your credit rating for 6 years and appear on public records. Always seek professional advice before proceeding with either option.

Two Formal Insolvency Routes

Individual Voluntary Arrangement (IVA)

A legally binding agreement with your creditors to pay what you can afford for 5–6 years. After completion, remaining unsecured debt is written off — typically 50–70% forgiven.

✓ Advantages

  • Keep your home in most cases
  • Keep your vehicle if needed for work
  • Can continue running a business
  • Fixed monthly payments for 5–6 years
  • 50–70% of debt typically written off
  • Less publicly visible than bankruptcy

✗ Disadvantages

  • Long commitment (5–6 years)
  • Rigid payment structure — can fail if missed
  • Windfall clause applies to bonuses/inheritance
  • May require equity release from property
  • Setup and ongoing fees (~£2,000–£5,000 total)
  • 6 years on credit file
Read Full IVA Guide →

Bankruptcy

A legal process where you're discharged from most debts after 12 months. All unsecured debts written off, but you may lose assets and face restrictions.

✓ Advantages

  • Quick discharge — just 12 months
  • All unsecured debts completely written off
  • Fresh financial start after discharge
  • No ongoing monthly fees
  • Pension remains protected
  • Clear end date

✗ Disadvantages

  • May lose your home (equity claimed)
  • Vehicle at risk if worth over £2,000
  • Cannot be a company director for duration
  • Professional restrictions (accounting, law, etc.)
  • Public announcement in The Gazette
  • Bank account restrictions (basic account only)
Read Full Bankruptcy Guide →

Complete Side-by-Side Comparison

Feature IVA Bankruptcy
Duration 5–6 years 12 months (discharged)
Debt Write-Off 50–70% typical 100% after discharge
Home Ownership ~ Usually kept ✗ At risk
Vehicle ✓ Keep if needed ~ Only if <£2,000
Upfront Costs No upfront fees £680 court fee
Monthly Payments Fixed for 5–6 years IPA for 3 years (if applicable)
Credit File Impact 6 years from start 6 years from start
Public Record Insolvency Register only Insolvency Register + The Gazette
Professional Impact ~ Some restrictions ✗ Major restrictions
Business Ownership ✓ Can continue ✗ Cannot be director
Bank Account ✓ Keep existing ✗ Basic account only
Windfalls (bonus/inheritance) Must declare and contribute Claimed by trustee during bankruptcy

Asset Impact Comparison

How each option affects your possessions:

🏠

Your Home

Property with equity

IVA ✓ Usually Keep
Bankruptcy ✗ May Lose
🚗

Your Vehicle

Car needed for work

IVA ✓ Keep
Bankruptcy ~ If <£2k
💼

Business/Job

Director or professional

IVA ✓ Continue
Bankruptcy ✗ Restrictions
💰

Savings

Money in bank accounts

IVA ~ Contribute
Bankruptcy ✗ Claimed
💳

Bank Account

Current account access

IVA ✓ Keep
Bankruptcy ✗ Basic Only
🏆

Pension

Retirement savings

IVA ✓ Protected
Bankruptcy ✓ Protected
💡

Who Should Consider Each Option?

IVA may suit you if: You're a homeowner with equity, have regular stable income, can commit to 5–6 years of fixed payments, need to continue running a business or working in certain professions.

Bankruptcy may suit you if: You have few or no assets, need a quick resolution (12 months), cannot maintain regular long-term payments, don't have professional restrictions concerns.

Not Sure Which Is Right for You?

Get free, impartial advice from qualified insolvency practitioners. No obligation, no sales pressure.

Get Free Assessment Try Debt Calculator