Bankruptcy v IVA - Which is better?

Bankruptcy v IVA (Individual Voluntary Arrangement) – which is better? As with any debt solution, there’s no actual ‘better’ or ‘worse’. The real question is: Bankruptcy v IVA – which is better for me?

Bankruptcy v IVA – which is better for me?

Are you working? If so, is your job secure? Do you have a home? Are you nearing retirement age? How much do you owe in unsecured debts?

Based on your answers to these questions (and others), a professional debt adviser will be able to tell you whether bankruptcy or an IVA could be the more appropriate debt solution for you.

For example:

• Someone with a small income and huge debts, for example, could be better off entering into bankruptcy, rather than an IVA.
• But someone with a regular income could be better off opting for an IVA, rather than bankruptcy – as could a homeowner, a solicitor or a company director.

Bankruptcy v IVA – why do people compare them with each other?

Both a bankruptcy and an IVA:

• Are a kind of insolvency.
• Allow you to write off debt.
• Reduce your ability to borrow while they’re in progress.
• Affect your credit rating for 6 years, potentially making it harder to get credit.
• Are unable to write off certain debts (secured debt, for example, or court fines).

Could bankruptcy be my best way out of debt?

Basically, bankruptcy could be the best way for you to clear your debts – but only if you can answer ‘yes’ to the following four questions:

• Is my disposable income low, unreliable – or both?
• Is my financial situation unlikely to improve in the near future?
• Am I genuinely unable to repay my debts in a realistic timeframe?
• Am I a tenant, with no valuable assets?

If so, then bankruptcy could be right for you – but even then, you should always talk to a professional debt adviser first. As the Insolvency Service website warns: ‘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’.

Could an IVA be my best way out of debt?

If you answer ‘no’ to any of the four above questions, there’s a good chance an IVA could be a reasonable way for you to clear your debts – but only if:

• You owe multiple unsecured creditors around £15,000 or more in total.
• You can’t make your monthly debt repayments.
• You could make regular smaller monthly debt repayments.

Bankruptcy v IVA – the choice

This page just provides some of the basic facts about bankruptcies and IVAs. If you’re considering either, it’s essential you talk to a professional debt adviser about your options. For free advice, call Think Money on freephone 0800 074 4222.

Related resources:

• IVA
• Bankruptcy
• Can an IVA save me from bankruptcy?
• Facts about IVAs
• IVA FAQs

Tags: iva, debt iva, iva uk, bankruptcy, insolvency

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