What is the Difference Between IVA and Bankruptcy?

An Individual Voluntary Arrangement (IVA) and bankruptcy are both formal debt solutions that help individuals clear their unsecured debts. They have some similarities, such as appearing on your credit file for six years and stopping further contact from creditors once they are in place. However, there are key differences between the two options:

1. Duration: Bankruptcy is typically a quicker process, lasting around 12 months, while an IVA usually lasts for 5 to 6 years.
2. Assets: In bankruptcy, your assets fall into the bankruptcy estate, and you may be required to sell your home or release equity above a certain threshold. In an IVA, you may be required to release equity above a certain threshold, but you do not have to sell your home.
3. Income: An IVA legally requires you to regularly contribute towards your debts, while bankruptcy may require you to make payments for up to three years.
4. Employment: Some jobs may be affected by bankruptcy or an IVA, with bankruptcy being more likely to impact your job, especially at a senior level. It is essential to check your employment contract and speak to your HR department confidentially to understand the potential impact on your job.
5. Property: If you rent your home, an IVA should have no effect on your living situation, while bankruptcy may allow you to stay in the same property if your rent is up to date.
6. Cost: The initial and ongoing costs of an IVA are taken as a pre-agreed proportion of monthly repayments, while bankruptcy has its own costs and fees.

Before deciding between an IVA and bankruptcy, it is crucial to seek independent, qualified advice to determine the best option for your situation.

Comparative Table: IVA vs Bankruptcy

Here is a table comparing the differences between Individual Voluntary Arrangements (IVA) and Bankruptcy:

Both IVAs and bankruptcy are legal processes that can write off some or all of your debt, offering protection from creditors taking further action against you to recover the debt. However, they work differently and have different impacts on your assets, job, and home. It's essential to consider which option is best for your situation and seek professional advice if needed.