# IVA vs bankruptcy — how do these UK debt solutions compare?

> Compare · Last reviewed 26 May 2026

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## Quick answer

An IVA is a formal, court-approved agreement to repay an agreed proportion of your debts over (typically) five to six years. Bankruptcy is a court order that writes off most unsecured debts, usually within 12 months, but with bigger consequences for assets and employment.

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Both are formal insolvency options in England & Wales (Scotland has its own equivalents — Trust Deed and Sequestration). Both go on the Insolvency Register. Both seriously affect your credit file for at least six years. Speak to a free debt charity (StepChange, National Debtline, Citizens Advice) before choosing either.

## Individual Voluntary Arrangement (IVA) vs Bankruptcy

| Criterion | Individual Voluntary Arrangement (IVA) | Bankruptcy |
| --- | --- | --- |
| Set up by | Licensed insolvency practitioner (IP) | You apply via GOV.UK (£680 fee) or a creditor petitions |
| Length | Usually 5–6 years | Usually 12 months (discharge), restrictions can last longer |
| Debt threshold | Generally £6,000+ unsecured debt across two or more creditors | No minimum (in practice usually £5,000+) |
| Home | Usually protected, but equity may be released near the end | Trustee may sell the home if there's equity |
| Car / assets | Reasonable car usually retained; non-essential assets may be sold | Non-essential assets sold; reasonable car often retained up to a value cap |
| Income payments | Affordable contribution agreed with creditors | Income Payments Agreement / Order for up to 3 years if surplus income |
| Public record | Insolvency Register (England & Wales) during the IVA | Insolvency Register + London Gazette |
| Restrictions | Borrowing >£500 needs IP consent | Can't act as company director; can't borrow >£500 without disclosure |
| Credit-file impact | Recorded for 6 years from start | Recorded for 6 years from start |

## When Individual Voluntary Arrangement (IVA) suits

- You have a reasonably stable income to make monthly payments
- You want to protect home equity where possible
- Your job restricts you from being bankrupt
- You have multiple creditors and want one fixed plan

## When Bankruptcy suits

- You have little or no surplus income or non-essential assets
- You can't sustain monthly IVA payments
- Debts are very high relative to ability to pay
- You want to deal with it in roughly a year and move on

## Frequently asked questions

### Are some debts not included?

Yes. Student loans, court fines, child maintenance and some others can't be written off by either route.

### Will my employer find out?

Both appear on the public Insolvency Register. Certain professions (e.g. some financial services, legal, accountancy roles) have rules about bankruptcy — check your contract before choosing.

### What about Scotland?

Scotland uses Protected Trust Deeds (broadly similar to an IVA) and Sequestration (broadly similar to bankruptcy). The thresholds, processes and durations differ — see AiB.

## Sources

- [GOV.UK — Bankruptcy](https://www.gov.uk/bankruptcy)
- [GOV.UK — Options for paying off debts (IVA)](https://www.gov.uk/options-for-paying-off-your-debts/individual-voluntary-arrangements)
- [StepChange Debt Charity](https://www.stepchange.org/)
- [AiB — Accountant in Bankruptcy (Scotland)](https://www.aib.gov.uk/)

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.