Is an IVA better than bankruptcy?

Is an Individual Voluntary Arrangement (IVA) better than bankruptcy? The only real answer is "sometimes", as it depends on the individual in question: not just how much they owe, but a whole range of other factors, such as what they earn, what they own, whether or not they work, what kind of job they have if they do...

However, if you`re facing significant debts and wondering whether you`d be better off with an IVA or with bankruptcy, a debt specialist should be able to answer the really important question: "Is an IVA better than bankruptcy for me?"

Is an IVA better than bankruptcy for me?

It depends on your situation.

If:

• you are a tenant, and/or
• you have a low or unreliable income, and/or
• you are approaching retirement age,

...then bankruptcy might be better for you than an IVA.

On the other hand, if you have a reliable, reasonably high income and:

• you are a homeowner, and/or
• you hold a certain job (company director, for example),

...then an IVA might be better for you than bankruptcy.

Bankruptcy & IVA – the similarities

Bankruptcies and IVAs are both kinds of insolvency. They both allow borrowers to repay a portion of their unsecured debt and write off the remainder. They both limit individuals` ability to borrow while they`re in progress, and will affect their credit rating, which could make it harder and more expensive to obtain credit for the next 6 years (from the day they start). And finally, they`re both unable to write off certain kinds of debt (such as secured debts and court fines).

Bankruptcy & IVA – the differences

• IVA - Duration: Normally 5 years.
• IVA - Effect on career: No fixed rules, but some companies may not employ someone with an IVA.
• IVA - Effect on home: Highly unlikely to force the sale of your home, but will probably require the release of some equity in the fifth year of the IVA.
• IVA - Publicity: Will not be advertised, but will appear in the publicly available Individual Insolvency Register.

• Bankruptcy - Duration: Will last 1 year in most cases, but payments can last for 3 years and a BRO (Bankruptcy Restriction Order) can last 15 years (although this would only be granted in exceptional cases).
• Bankruptcy - Effect on career: You would not be allowed to hold certain positions, such as company director, local government councillor or school governor.
• Bankruptcy - Effect on home: Very likely to force you to sell your home.
• Bankruptcy - Publicity: Will be advertised in newspapers.

Bankruptcy or IVA – how do I know which is better for me?

It`s a complicated question, and this page only provides a brief overview of the issues involved. The choice you make will probably have a serious impact on your life for (at least) the next 6 years, so you should talk to a professional debt adviser before you make your decision.

For free advice, call Think Money on freephone 0800 195 2911.

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