IVA vs Bankruptcy: Key Differences Explained for UK Debtors

An IVA (Individual Voluntary Arrangement) and bankruptcy are both formal insolvency solutions for people who cannot repay their debts. The key difference is control: an IVA lets you negotiate a structured repayment plan and typically protects your home, while bankruptcy wipes most debts faster but hands control of your assets to the Official Receiver. The right choice depends on your income, assets, and career.

How long do an IVA and bankruptcy last?

An IVA typically runs for five years. If you own a property with equity, a sixth year is usually added to allow time for a remortgage review. Once you complete all payments, your IP issues a completion certificate and any remaining debt in the arrangement is written off.

Bankruptcy discharge happens automatically after 12 months. However, if the Official Receiver determines you have surplus income, they can issue an Income Payments Agreement (IPA) or Income Payments Order (IPO) that requires you to make payments for up to three years. Both solutions remain on your credit file for six years from the start date.

What income do you need for each option?

An IVA requires a regular income with genuine surplus each month after essential living costs. Your insolvency practitioner uses this surplus to calculate your monthly repayments. Without any disposable income, an IVA is not viable.

Bankruptcy has no income requirement. You can apply for bankruptcy even if you are unemployed or on benefits. The application fee is £680, payable to the Insolvency Service (as of 2025). If you cannot afford the fee, you may be able to pay it in instalments.

How do the costs compare?

IVA fees are taken from your monthly repayments, so you do not pay them upfront. Bankruptcy fees are paid in advance to start the process.

Will you have to sell your home?

In an IVA, you are very unlikely to be forced to sell your home. Your IP will try to protect it. In the final year, you may be asked to remortgage up to 85 per cent of its value to release equity for creditors. If remortgaging is not possible, your IVA is usually extended by 12 months instead.

In bankruptcy, the Official Receiver will assess any equity in your home. If there is meaningful equity, the Official Receiver or trustee can apply to sell the property to release funds for creditors. Your interest in the home vests in your bankruptcy estate and the trustee has three years to deal with it. If they take no action within three years, ownership reverts to you. If you have little or no equity, your home is usually safe.

How does each option affect your career?

An IVA has limited career impact for most people. Your employment contract may contain a clause prohibiting insolvency, so check it before proceeding. Certain regulated roles in financial services require FCA approval, which an IVA could complicate. Working in the armed forces or the police is more restricted but not automatically prohibited.

Bankruptcy has stricter career restrictions. It is illegal to act as a company director or be involved in company management while bankrupt without court permission. You cannot hold certain public offices, including as a Member of Parliament or local government councillor. Some professional bodies also suspend membership during bankruptcy. Check with your employer or professional body if you are unsure.

How public is each option?

Both an IVA and bankruptcy are recorded on the Individual Insolvency Register, which is publicly searchable online. Bankruptcy is additionally published in the London Gazette, a public record. An IVA is not published in the Gazette. Neither is typically advertised in local newspapers, contrary to a common misconception.

IVA vs bankruptcy: which is right for you?

FAQ

Can I choose between an IVA and bankruptcy?

Yes, in most cases. You apply for bankruptcy yourself through the Insolvency Service website. An IVA requires a licensed insolvency practitioner and creditor agreement. If creditors holding 75 per cent or more of your debt by value reject the IVA proposal, you may need to consider bankruptcy instead.

Does bankruptcy clear all debts?

No. Bankruptcy does not clear student loans, court fines, child maintenance arrears, or debts arising from fraud. Most other unsecured debts such as credit cards, personal loans and overdrafts are cleared on discharge.

Will an IVA or bankruptcy affect my partner?

Your IVA or bankruptcy covers only your own debts. However, joint debts are more complex: your share is covered, but the creditor can still pursue your partner for the full outstanding balance. Speak to a free debt adviser at StepChange before proceeding if you have joint debts.

Can I get credit after an IVA or bankruptcy?

Both remain on your credit file for six years. During this period, credit will be difficult to obtain and expensive when available. After the six-year mark, both records are removed automatically and you can begin rebuilding your credit score from that point.

What is a debt relief order and how does it compare?

A Debt Relief Order (DRO) is available if you owe less than £30,000, have assets worth less than £2,000, and have a surplus income of less than £75 per month. It freezes debts for 12 months and then writes them off. The application fee is £90. It is administered through an approved intermediary and is an alternative worth exploring if you meet the thresholds.