Bankruptcy and an Individual Voluntary Arrangement (IVA) are formal insolvency solutions, but they place risk in different places. Bankruptcy is usually shorter and gives a trustee control over assets. An IVA normally lasts longer and follows a creditor-approved proposal with regular reviews.
This comparison mainly covers England and Wales. Scotland uses sequestration, the Minimal Asset Process, protected trust deeds and the Debt Arrangement Scheme. Northern Ireland has separate procedures.
Quick comparison #
| Factor | Bankruptcy in England and Wales | IVA |
|---|---|---|
| Typical main period | Discharge is normally after 12 months, although asset work and income payments can continue | Protocol contributions are normally 60 months, or 72 months where the current family-home test applies |
| Income payments | An agreement or order can require affordable payments for up to three years | Payments follow the approved proposal and are reviewed during the arrangement |
| Application cost | The current debtor application fee is £680 | Fees must be disclosed and are normally paid from contributions under the approved proposal |
| Assets | A trustee can realise non-exempt assets and deal with a beneficial interest in property | Asset treatment is set out in the proposal; the 2025 Protocol excludes the family home but uses a longer term for sufficient beneficial interest |
| Debt outcome | Discharge releases many bankruptcy debts, subject to statutory exceptions | Remaining included qualifying debt is normally released only after successful completion |
| Approval | An adjudicator decides an individual’s online application | Normally needs at least 75% by value of creditors who vote, with additional connected-creditor rules |
| Failure risk | Restrictions and trustee work follow bankruptcy law | A failed IVA can leave unpaid debts, interest under the terms and possible creditor action |
Neither route has a standard write-off percentage, and neither is automatically better.
How long do they last? #
Bankruptcy #
Discharge is normally automatic after 12 months, unless it is suspended. Discharge ends most bankruptcy restrictions and releases the person from many bankruptcy debts.
If there is affordable surplus income, an Income Payments Agreement or Income Payments Order can usually run for up to three years. The trustee can also continue dealing with assets after discharge. Bankruptcy is therefore not always finished in every practical sense at month 12.
IVA #
Under the 2025 IVA Protocol, a standard protocol proposal is normally 60 months. If the consumer’s individual beneficial interest in a family home is £10,000 or more, the protocol proposal is normally 72 months. Payment breaks, arrears or an approved variation can extend the calendar end date.
The signed proposal and any creditor modifications control the particular arrangement. Older and bespoke IVAs can differ from the 2025 Protocol.
Payments and overall cost #
The current bankruptcy application fee in England and Wales is £680. It must normally be paid before the online application is submitted. After the order, income payments depend on assessed surplus rather than the debt balance alone.
An IVA provider must disclose nominee and supervisor fees in the proposal. These are normally taken from the contributions or assets paid into the arrangement, reducing the amount distributed to creditors. Compare:
- total expected contributions;
- all fees and expenses;
- any assets or additional payments required;
- the estimated return to creditors; and
- what creditors are expected to receive in bankruptcy.
A low upfront cost does not make an IVA cheaper overall.
What happens to debt? #
Bankruptcy discharge releases many debts that existed at the date of the order, but important exceptions include court fines, most student loans, child-maintenance liabilities and debts arising from fraud. Secured creditors retain rights over their security.
In an IVA, only debts within the arrangement and legally capable of being bound are treated under its terms. Remaining included qualifying debt is normally released if the IVA completes. If it fails, the outstanding position follows the proposal and applicable law; creditors may be able to resume action.
Ask for a written schedule showing every creditor and whether each debt is included, excluded, secured, disputed or jointly owed.
Your home #
Bankruptcy #
A bankrupt person’s beneficial interest in a home generally forms part of the bankruptcy estate. The trustee has statutory options and time limits for dealing with it, which can include a sale, a family buyout or a charge. Low or negative equity, occupancy, joint ownership and exceptional circumstances can affect the outcome.
Do not assume either that a home will definitely be sold or that it is safe. Obtain case-specific advice before applying.
IVA #
The 2025 Protocol does not require the consumer to sell or release equity from the family home. It calculates an individual beneficial interest using 85% of a reasonable property value less secured borrowing. An interest of £10,000 or more normally results in a 72-month proposal; below that level, the home is excluded without that additional 12 months.
This is a protocol rule, not a universal promise for every bespoke or older IVA. The protection also depends on the arrangement remaining in force and being completed.
Cars and other assets #
In bankruptcy, essential household goods and items reasonably needed for work or basic domestic needs can be exempt. A vehicle’s necessity and value are assessed; a trustee may realise excess value or arrange a cheaper suitable replacement where the law allows.
An IVA proposal should state how a vehicle, savings, investments, business assets and other property will be treated. There is no universal IVA car-value rule. Finance ownership, reasonable need, replacement cost and creditor modifications matter.
Work and business restrictions #
An undischarged bankrupt cannot act as a company director without court permission and faces restrictions on managing a company and obtaining credit. Some professions, licences, public offices and employment contracts impose additional rules.
An IVA does not create the same general director disqualification, but professional rules, contracts and regulators can still require disclosure or impose restrictions. Check the actual contract or regulator before choosing either option.
For self-employed people, both routes need specialist advice about trading, tax, bank accounts, stock, tools, leases and employees.
Credit files, registers and future borrowing #
Bankruptcy and an IVA normally remain on UK credit files for six years from their respective start dates. Both are recorded on public insolvency registers while the statutory publication rules apply; bankruptcy also has Gazette publication.
Future mortgage or credit approval depends on the lender, time elapsed, deposit, affordability and the rest of the credit history. There is no reliable promise that a mortgage will be available a fixed number of years after discharge or completion.
When a DRO may be better #
In England and Wales, a Debt Relief Order may be available where:
- qualifying debts are £50,000 or less;
- spare income is £75 a month or less;
- general assets are £2,000 or less;
- no more than one permitted domestic vehicle is worth over the current £4,000 limit;
- the applicant does not own a home; and
- the residence, prior-solution and other conditions are met.
There is no DRO application fee, and an approved debt adviser must apply. The moratorium normally lasts 12 months; listed qualifying debts normally no longer have to be paid at the end if the DRO remains in force and circumstances have not caused it to be revoked.
If you live in Scotland #
Do not use an England-and-Wales bankruptcy or IVA comparison as if the Scottish rules were identical. A Scottish money adviser should compare:
- the Debt Arrangement Scheme, which repays included debts through an approved programme;
- a protected trust deed, which normally involves contributions for at least 48 months and the transfer of assets to a trustee;
- Full Administration bankruptcy; and
- the Minimal Asset Process (MAP) for people who meet its debt, income and asset conditions.
MAP currently has no application fee. Its headline debt ceiling is below £25,000, and the full current eligibility test must be checked by an approved money adviser. Do not rely on old articles quoting a £50 fee or a £640 minimum debt.
A practical decision framework #
Bankruptcy may deserve closer comparison where there is little to protect, a five- or six-year contribution plan is not sustainable, and the work or asset restrictions are manageable.
An IVA may deserve closer comparison where sustainable contributions produce a worthwhile creditor return, assets and the family-home treatment are clear, and the person can tolerate the longer commitment and review obligations.
A DRO may be the stronger option where its strict limits are met. A DMP may be preferable where full repayment is realistic and formal insolvency is disproportionate, although creditors do not have to freeze interest or stop action.
Before deciding, obtain a written comparison covering:
- every debt and whether it is included;
- monthly affordability under a realistic budget;
- home, vehicle, savings and business assets;
- fees and total payments;
- employment, directorship and regulatory restrictions;
- the result if income rises, falls or the arrangement fails; and
- every available alternative in the correct UK jurisdiction.
Use the debt-options calculator as an initial comparison, not a recommendation. Only a full regulated assessment can decide which route is suitable, and no calculator can guarantee approval or a write-off.