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Bankruptcy vs IVAs

Bankruptcy vs IVAs

Although bankruptcy is the most famous debt solution, there are plenty of options available to suit a wide variety of problem debt situations. A popular alternative is the ‘Individual Voluntary Arrangement’, which involves you paying one reduced, manageable monthly payment based on your real income and expenditure for a minimum of five years. But how do they compare?

Bankruptcies and IVAs both:

  • Are formal, legal solutions
  • Stop creditors contacting you
  • Write off some of your debts
  • Could result in a repayment plan based on your income and expenditure
  • Place you on the insolvency register, and thus is on your credit report, for six years
  • Both might result in career restrictions, although there are usually more severe restrictions placed on bankruptcies


  • Requires the sale of your assets, such as your home, your car, games consoles, jewellery and more to pay your creditors
  • Writes off your debts in one year, with repayments taking a total of three years
  • Makes an Official Receiver the legal owner of your property and legally in charge of your finances
  • Freezes your bank accounts
  • Costs £680
  • For more information about bankruptcy, click here


  • Requires you to pay one reduced, affordable monthly payment based on your income and expenditure, worth at least 10% of the total of your debts, to pay your creditors
  • Writes off your debts after five years
  • Allows you to retain control of your assets, which protects them from being sold, although you may need to release equity through remortgaging your house.
  • Allows flexibility so that you could have payment breaks and adjustments when your circumstances need it
  • Has no extra fees. Insolvency Practitioners are paid within your affordable monthly payments

Ultimately, bankruptcies could be better for people who don’t own their homes and have few assets, or none, to sell and who can’t afford to pay even as much as 10% of their current debts, or for people who have tried and failed to have an IVA. An IVA works for people with some assets to protect and who can afford monthly payments.