Key Differences between IVA and Bankruptcy

Learn the key differences between an IVA and bankruptcy to help make an informed decision about which option is more suitable for your circumstances.

Whilst bankruptcy and Individual voluntary arrangements (IVAs) are both forms of insolvency they work very differently, each having their benefits and drawbacks.

Although bankruptcy can write off your debts, it is not a decision to be made lightly as it can also swallow up your assets. As the alternative to bankruptcy, IVAs help you pay off debts over a manageable period of time.

Bankruptcy and IVAs share some of the same consequences, both options will appear on your credit file for six years and will require you to be listed in the publicly searchable insolvency register.

As IVAs and bankruptcy are both formal debt solutions, with either option you choose, you will stop receiving further contact from your creditors once they’re up and running.

However, despite the similarities, the two options also have several differences which you should make sure you’re informed about before deciding which route is right for you.

(See also: What happens when you claim bankruptcy)


Bankruptcy is usually a much quicker process than an IVA.  Bankruptcy is typically over within 12 months (although you may still be required to make payments for up to three years), whilst IVAs are usually paid over a period of 5 to 6 years.


Bankruptcy requires you to release equity of over £1,000 and may require you to sell your home, IVAs don’t require you to sell your home, but may require you to release equity of over £5,000.


An IVA will legally require you to regularly pay into the arrangement, so you will need surplus income to do so, bankruptcy does not require this.  If you have an IVA in place and your income increases or you receive money unexpectedly then you will be required to pay more into your IVA.


Going bankrupt will prevent you from certain employment, like working as a company director or a local government councillor.  IVAs do not have the same implications, but certain professions in industries like accounting or legal may state in your terms of employment that you cannot remain employed in your position if you become insolvent, so make sure you read over them thoroughly.

For guidance or advice about personal insolvency, get in touch with one of our experts here at Irwin Insolvency by giving us a call for free on 0800 2545122.

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency,
 rescue and turnaround.