Individual Voluntary Arrangement vs Bankruptcy
Individual Voluntary Arrangement against Bankruptcy on duration, cost, your home, your credit file and what gets written off. An honest comparison, with the risks of both.
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The comparison in full
| Individual Voluntary Arrangement | Bankruptcy | |
|---|---|---|
| Legally binding on creditors | Legally binding on included creditors | Full protection, then discharge |
| Duration | 60 months, or 72 with home equity | Discharged in 12 months; payments up to 3 years |
| What you pay | Monthly, affordability-based | Only if you have surplus income |
| Cost to you | Paid from your monthly payments | £680 application fee |
| Your home | Excluded; equity sets the term | May be sold |
| Credit file | 6 years from the start date | 6 years from the order |
| Public record | Yes — Listed on the public Individual Insolvency Register, which anyone can search. Your address can be withheld only on evidenced safety grounds. | Yes — Listed on the public Individual Insolvency Register, and in some cases advertised more widely. |
| Debt written off | Yes, at the end of the term | Yes, at the end of the term |
| Where it applies | England, Wales and Northern Ireland | England, Wales and Northern Ireland (Scotland calls it sequestration) |
When Individual Voluntary Arrangement is the better fit
People with multiple unsecured debts, a reliable monthly surplus, and often assets or a home they want to protect. The 2025 IVA Protocol indicates typical suitability includes several debts totalling around £7,000 or more, and not being eligible for a DRO.
When Bankruptcy is the better fit
People with no realistic prospect of repaying, who are outside DRO limits — often because of the level of debt, income or assets.
The verdict
If you own a home with meaningful equity, or your job would be affected by bankruptcy, the IVA route is worth its cost. If you rent, have few assets, and your main concern is being free of the debt, bankruptcy is often the shorter and cheaper answer — and it is regularly the right one for people who were sold something longer and more expensive.
Risks on both sides
- If you stop being able to pay, the IVA can fail. Interest and charges can be added back on and creditors may petition for your bankruptcy.
- Fees reduce what your creditors receive, so more of your payment goes to costs than in a free Debt Management Plan.
- It is a public record for the duration.
- Holding £10,000 or more of beneficial interest in a family home means a 72-month term rather than 60.
- Some debts cannot be included — student loans, court fines, child maintenance and secured debts among them.
- Assets including your home and a vehicle above a modest value can be sold.
- Certain professions restrict or prohibit undischarged bankrupts — company directors, some financial services and legal roles, and some regulated occupations.
- It is public, and can be reported.
- You may be subject to a Bankruptcy Restrictions Undertaking of 2 to 15 years if conduct is criticised.
- The £680 fee has to be found first.
Still weighing these two up?
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