Whether an IVA is better than bankruptcy depends entirely on your circumstances — what you owe, what you own, and what you want to protect.
May not be suitable in all circumstances. Fees apply, read more. Your credit rating may be affected, read more.
An IVA is a formal insolvency procedure. It must be approved by your creditors, stays on your credit file for six years, fees are taken from your payments, and debts are only written off if you complete it. It isn’t right for everyone.
Both are forms of personal insolvency, and both can give you breathing space from your creditors, but they work very differently. Here’s how to weigh them up.
| IVA | Bankruptcy | |
|---|---|---|
| Type | Formal agreement with creditors | Court-based insolvency |
| Usual length | 5–6 years | Usually discharged in 12 months |
| Your home | Usually kept (equity may be released) | May be sold to release equity |
| Debt written off | Qualifying debts in the IVA, at the end | Most unsecured debts on discharge |
| On your credit file | 6 years from the start date | 6 years from the start date |
| Public record | Individual Insolvency Register | Individual Insolvency Register |
Figures are a general guide and won’t apply to everyone. The right route depends on a full look at your situation — see the official overview of debt options on GOV.UK.
An IVA is a legally binding agreement between you and your creditors to repay what you can afford over a set period, usually five to six years, supervised by a licensed insolvency practitioner. It lets you avoid bankruptcy and normally keep your assets, including your home, as long as you keep up the agreed payments. At the end of the term, the qualifying debts included in the arrangement can be written off. Read more about how to apply for an IVA and how an IVA affects your credit rating.
Bankruptcy can clear most unsecured debts relatively quickly — you’re usually discharged after 12 months — but it can have more serious consequences for your assets. A trustee is appointed to manage your finances and may sell assets that aren’t protected, including your home if there’s equity in it. You can apply directly via GOV.UK.
See which debt solutions you could qualify for. Checking your options won’t affect your credit score.
This is often the deciding factor. Bankruptcy can stop legal action against you, but depending on how much equity you have, you may be required to sell your home to repay creditors. An IVA usually lets you stay in your home — although near the end of the term you may be asked to release equity by remortgaging, and if that isn’t possible the IVA can be extended by up to 12 months.
Bankruptcy usually lasts 12 months, after which most unsecured debts are discharged. Some debts aren’t included — such as student loans, court fines and child maintenance — and still need to be paid. During the 12 months a trustee manages your finances, and if you have spare income you may have to make payments under an Income Payments Agreement for up to three years. The bankruptcy stays on your credit file for six years from the date of the order.
If your main concern is protecting assets like your home and you can afford a regular monthly payment, an IVA may suit you better. If you have little or no income and few assets, bankruptcy — or a Debt Relief Order — may give you a faster fresh start. Neither is right for everyone. Still deciding? Compare an IVA vs a Debt Management Plan.
See which debt solutions you could qualify for.
