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