IVA or Bankruptcy?

Individual Voluntary Agreements were introduced to give consumers an alternative to bankruptcy. Certain unsecured debts can be included in an IVA – for example, store cards, credit cards, bank overdrafts and personal loans. There are many companies offering IVA help who can assist in working out which is best for you.

It is vital that anyone considering either an IVA or bankruptcy takes professional advice as there could be significant long term repercussions if you make the wrong choice.

An IVA would normally be over 60 months, whereas a bankruptcy would end in 12 months. It is possible to end an IVA early if you are able to pay a lump sum to your creditors.

With bankruptcy, a creditor can obtain a bankruptcy order for debts of over £750. Their assets would then be disposed off, with the money raised split between creditors. This would then free the debtor of any further obligations.

With an IVA, the debtor would pay off an agreed amount each month for 5 years, which would typically be a fraction of the original amount owed. The main benefit of an IVA over bankruptcy would be the ability to keep your home (although you may need to release some equity in it to pay creditors).

an IVA is a confidential agreement – it will be listed on the Insolvency Service website only, not released publicly.  Information on bankruptcy would be included in a local newspaper, which many people will find uncomfortable and embarrassing.