If you’re a UK citizen struggling with debt, you may feel overwhelmed by the options
available. Two of the most common solutions are Individual Voluntary Arrangements (IVAs)
and bankruptcy. Both can help you manage unmanageable debt, but they work differently and
come with distinct advantages and consequences. We specialise in guiding clients through the
IVA process, so this blog will help you compare both options and determine the best path for
your financial future.
What is an IVA?
An Individual Voluntary Arrangement is a formal agreement between you and your
creditors to pay back a portion of your debt over a fixed period, typically five to six years.
Managed by an Insolvency Practitioner (IP), an IVA allows you to make affordable monthly
payments based on your income and living expenses.
Key Features of an IVA:
o Legally binding agreement with creditors.
o Debt is written off once you complete the arrangement.
o You retain control of your assets, such as your home and car.
o Payments are fixed and tailored to your financial situation.
What is Bankruptcy?
Bankruptcy is a legal process that writes off your debts entirely when you are unable to repay
them. It is usually a last-resort option and involves handing over control of your finances to
an Official Receiver. Bankruptcy typically lasts for one year, after which most of your debts
are discharged.
Key Features of Bankruptcy:
o Provides a fresh financial start by clearing your debts.
o Requires selling or surrendering certain assets, such as property or vehicles.
o Restricts certain activities, such as borrowing large sums or acting as a
company director.
o The process and details are made public in the Insolvency Register.
Comparing IVAs and Bankruptcy
To help you better understand the differences between IVAs and bankruptcy, here’s a detailed
breakdown of key factors to consider:
Eligibility
IVA: Requires a steady income and total debts over £10,000.
Bankruptcy: No specific income threshold; typically suited for cases where debts are
unmanageable, and repayment is not feasible.
Impact on Assets
IVA: You generally retain ownership of your home, car, and other assets, as long as
you adhere to the repayment plan.
Bankruptcy: Assets such as property or vehicles may need to be sold to repay
creditors, depending on their value and necessity.
Duration
IVA: Lasts between 5–6 years, during which you make regular, agreed-upon
payments.
Bankruptcy: Typically lasts for one year, though restrictions on financial activity
may continue for longer.
Effect on Credit Rating
IVA: Negatively impacts your credit score for six years from the start date.
Bankruptcy: Also negatively affects your credit score for six years and is recorded
on your credit file.
Privacy and Publicity
IVA: A private agreement with creditors. While it is recorded on the public
Insolvency Register, it’s less likely to draw public attention.
Bankruptcy: A more public process, with details listed on the Insolvency Register
and potentially published in newspapers.
Costs
IVA: Fees for the Insolvency Practitioner are included in your monthly payments, so
there are no upfront costs.
Bankruptcy: Requires upfront court fees and other administrative costs, which can be
a hurdle for some individuals.
Control Over Finances
IVA: You retain control over your finances, with a structured plan based on your
budget and approved by creditors.
Bankruptcy: An Official Receiver takes control of your assets and finances during
the bankruptcy process.
When is an IVA the Better Choice?
An IVA might be the right option for you if:
You have a steady income that allows you to make regular monthly payments.
You want to protect your home, car, or other assets.
You’re looking for a private debt solution with minimal public exposure.
You can commit to a longer-term repayment plan (5–6 years).
We specialise in helping clients tailor IVAs that fit their unique financial circumstances. We
believe in empowering you to regain control of your finances while protecting your assets
and providing peace of mind.
When is Bankruptcy the Better Choice?
Bankruptcy may be more suitable if:
You have little to no income and cannot afford regular payments.
You don’t own significant assets or are willing to give them up to clear your debts.
Your financial situation requires immediate resolution.
You’re not concerned about the process being public.
Which Option is Right for You?
Choosing between an IVA and bankruptcy depends on your financial situation, priorities, and
goals. While both options provide relief from unmanageable debt, they differ in how they
impact your life and future financial stability.
If you’re unsure, speaking with a professional can help clarify your options. At [Your
Company Name], we offer free, confidential consultations to help you determine if an IVA is
the right path for you. Our experienced team can guide you through the process, ensuring that
you make an informed decision tailored to your needs.
Take the Next Step Towards Financial Freedom
Dealing with debt can be stressful, but you don’t have to face it alone. Contact us today to
learn more about how we can help you take control of your finances with an IVA. With our
support, you’ll have the tools and knowledge to move forward confidently and rebuild your
financial future.
Call us now or fill out our online inquiry form to get started!