IVA or Bankruptcy

Summary: This article explores the key differences between an Individual Voluntary Arrangement (IVA) and Bankruptcy, outlining the key considerations for each.

Individual Voluntary Agreement (IVA)

IVAs were originally introduced to help small businesses overcome debt problems. More recently, they have become available to individuals battling personal debt. They are available to anyone with more than about £12,000 of unsecured debt and last usually for a period of 5 years. An Insolvency Practitioner (IP) will calculate how much income is left after all essential expenditure, such as mortgage payments, utility bills, food and so on. They will then propose an affordable monthly payment to the creditors. Assuming they agree, once the term of the IVA is complete, any outstanding debt is cleared.

Considerations with an IVA

The length of an IVA is generally a longer period than bankruptcy (usually 5 years), and during this period details are recorded in the Insolvency Record. This is a publically available document so anyone from family, friends and potential employers could find out about the individuals financial position. Furthermore, while it is unusual for an individual in an IVA to have to sell their home, they may have to remortgage if there is enough equity available. Details will also be added to the debtor's credit record for a period of 6 years.


With all the alternatives available, bankruptcy is often considered to be a last resort. A bankruptcy order usually lasts for a period of 12 months, though it could be as long as 3 years or more, after which time, the outstanding debt may be written off. Creditors, or the individual themselves may petition for bankruptcy if they have more than £750 is owed. There are also fees that must be paid which total £700.

Considerations with Bankruptcy

There are number of considerations to be made before declaring bankruptcy (if it is through choice). The main point is that if the individual is a homeowner, they may be expected to sell their home in order to repay some, or all, of the debt owed. Furthermore, there may be restrictions placed on employment, for example, a bankrupt individual cannot set up, run or be involved in any way with the marketing or promotion of a company. Nor may they be a company director. As with an IVA, details are also entered into the debtor's credit record and the Insolvency Register.

Which is best?

It is impossible to generalise over which solution is best as it would entirely depend on the individuals circumstances. A homeowner may be better off considering an IVA as they are more likely to be able to keep their home, whereas a tenant may consider bankruptcy as it will last a shorter period, though even then it is worth checking the tenant agreement, as some landlords won't allow bankrupts to rent their properties.

IVA and Bankruptcy?

It is possible for an individual to apply for an IVA even after they have been made bankrupt. If it is approved, then the individual can apply to the court to have the bankruptcy annulled. This may be a preferred option for those concerned about the stigma and restrictions that may be applied with Bankruptcy.

The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.