All about IVAs
What's the difference between bankruptcy and an IVA?
If you're struggling with unmanageable debts and it seems there's no way out, you might need to consider bankruptcy. Under the right circumstances, bankruptcy can be the best approach.
- On the plus side, bankruptcy can give you a chance to 'start over', with your debts written off.
- However, it'll also see your home and other assets sold off and the proceeds divided among your lenders.
In other words bankruptcy could give you a 'fresh start' with no debts - but no assets either. So for many people, an IVA is quite simply a better idea.
The differences between bankruptcy and an IVA
Here's a summary of the differences between bankruptcy and an IVA. If you'd like more detailed information, just call us.
| IVA | Bankruptcy | |
| Duration | Typically lasts five years. |
Typically lasts one year. You might have to make payments for up to three years. |
| Effect on home | Might require you to release equity but you won't have to sell your home. |
Will require you to release any equity over £1,000. You may have to sell your home. |
| Publicity | Won't advertise your insolvency. It will appear in the Insolvency Register (which is publicly available). |
Will be advertised in newspapers. It will also be publicly available in the Insolvency Register. |
| Effect on career | Wouldn't affect your career options unless it's a condition of your employment. |
Means you're legally not allowed to do some jobs - like being a local government councillor or a company director. |
IVA or bankruptcy?
Without expert advice, it's very difficult to know whether an IVA or bankruptcy would be a better option for you.
One thing is certain: bankruptcy is a serious step and it's well worth exploring the alternatives. To quote The Insolvency Service:
'The principal statutory alternative to an IVA is bankruptcy. Bankruptcy should always be the last resort as the debtor will lose control of their assets and will be subject to bankruptcy restrictions, potentially up to 15 years.'
IVA pros & cons
A look at the pros & cons of entering an IVA.
The pros
- Writes off unaffordable unsecured debt on successful completion
- Fixed repayment plan - you'll know how much you're paying each month, and for how long (normally five years)
- Protects against action from lenders
- Can help to ensure homeowners avoid repossession (unlike bankruptcy)
The cons
- Will normally require homeowners to release equity in the final year of the arrangement
- Will affect your credit rating for six years from the date the IVA is registered
- Lasts longer than bankruptcy normally does
- Will leave you with very little money for non-essentials
Bankruptcy pros & cons
A look at the pros & cons of entering bankruptcy.
The pros
- Once your bankruptcy is over, any outstanding unsecured debt will be written off
- You'll be protected against any action by your lenders
- You could be discharged after a year
- It could give you a chance to 'start over'
The cons
- You could lose your assets, including home
- Your bankruptcy will be advertised in newspapers
- Your bankruptcy will stay on your credit file for six years
- You may have to make contributions for up to three years (15 years in extreme cases, if you're subject to a Bankruptcy Restriction Order)
If you want to know more, please call 0800 970 7725 today.
It's good to know:
- We have an excellent relationship with the UK's major lenders and creditors
- We pride ourselves on our approach to great customer service
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