Two Different Approaches to Insolvency
Both an IVA and bankruptcy are formal insolvency procedures under the Insolvency Act 1986, and both can result in debt being written off. However, they differ significantly in how they work, what they cost, how long they last, and what impact they have on your life.
Key Differences at a Glance
| Feature | IVA | Bankruptcy |
|---|---|---|
| Duration | Typically 60 months | Typically 12 months |
| Protect your home | Usually yes | Often at risk |
| Keep your job | Usually yes | May restrict certain roles |
| Creditor contact stops | Yes — immediately | Yes — immediately |
| Debt written off | At completion | On discharge (12 months) |
| Credit file impact | 6 years | 6 years |
| Public register | Yes | Yes |
| Minimum debt | ~£6,000 | No minimum |
| Cost | Fees from payments | £680 court fee |
| Income payments | Monthly for 60 months | Up to 3 years (IPA) |
Protecting Your Home
This is often the single biggest factor. In bankruptcy, the Official Receiver may seek to realise the equity in your home — potentially forcing a sale. In an IVA, your home is generally protected, though equity may need to be considered in year 4 via remortgage. If you are a homeowner, an IVA almost always offers better protection than bankruptcy.
Employment Restrictions
Bankruptcy carries legal restrictions — you cannot act as a company director, and some professional licences (solicitors, IFAs, certain civil service roles) are affected. An IVA carries far fewer formal employment restrictions, though you should still check your employment contract.
For most people in standard employment, neither bankruptcy nor an IVA will affect their job. The key exceptions are financial services and certain professional regulated roles.
Which is Right for You?
Bankruptcy may be preferable if you have no assets, no significant income, and want a faster resolution. An IVA is generally preferable if you have assets to protect (especially a home), a regular income, and want more control over the process. A free debt adviser can help you weigh these factors for your specific situation.
Free debt advice: For personal advice tailored to your situation, contact MoneyHelper (0800 138 7777), StepChange (0800 138 1111), or Citizens Advice — all free, all regulated.