IVA vs Bankruptcy: Which Option Is Different?

Written by IVA Online Editorial Team Reviewed by IVA Online Editorial Team Last reviewed 11 July 2026

An IVA and bankruptcy are both formal insolvency procedures, but they deal with payments and assets differently. A protocol IVA normally involves affordable contributions for five or six years. Bankruptcy usually leads to discharge after 12 months, but valuable assets can be sold and surplus-income payments can continue for up to three years.

This guide covers England and Wales. Scotland and Northern Ireland use different procedures and rules.

Quick comparison

Factor	Protocol IVA	Bankruptcy
How it starts	Proposal prepared by a licensed Insolvency Practitioner and approved by the required creditor majority	Online application decided by an Insolvency Service adjudicator, or a qualifying creditor petition
Typical core period	Five or six years under the current protocol	Discharge is usually after 12 months
Ongoing payments	Affordable contributions under the proposal	An income payment agreement or order can last up to three years where surplus income is available
Direct fee	Practitioner fees are included in contributions and disclosed in the proposal	£680 application fee for your own bankruptcy
Family home	Not sold or equity-released under the 2025 Consumer IVA Protocol; equity can make the term six years	The beneficial interest can be sold or otherwise dealt with by the trustee
Other assets	Treatment depends on the proposal	Non-exempt assets may be sold
Creditor collection	Included creditors are bound after approval	Bankruptcy creditors are generally dealt with through the bankruptcy
Public record	Entered on the Individual Insolvency Register	Entered on the Individual Insolvency Register and other notices may be published
Credit file	Normally six years from the IVA start	Normally six years from the bankruptcy order
Failure risk	Can fail if terms are not met, allowing creditors to pursue balances again	Restrictions and trustee duties continue even after discharge where applicable

How an IVA works

An Individual Voluntary Arrangement is a legally binding agreement with included creditors. A licensed Insolvency Practitioner prepares the proposal, works out affordable contributions and puts it to creditors. Approval requires the statutory creditor majority; the practitioner should explain the voting calculation and any proposed modifications.

Under the current Consumer IVA Protocol:

regular payments normally run for five years
the term is normally six years where family-home equity exceeds the protocol threshold
the family home is not sold and equity is not released into the IVA
fees are included in contributions, not charged as a separate upfront bill
income and expenditure are reviewed during the arrangement
included debts are resolved only after successful completion

A bespoke IVA can use different terms. Read the actual proposal rather than relying on a generic provider illustration.

How bankruptcy works

You apply online to the Insolvency Service in England and Wales. The current application fee is £680 and must be paid before submission, although it can be paid in instalments. An adjudicator decides the application.

If a bankruptcy order is made:

the Official Receiver or another trustee takes control of the bankruptcy estate
valuable non-exempt assets may be sold for creditors
you must provide information and cooperate with the trustee
an income payment agreement or court order may require contributions for up to three years
discharge is usually automatic after 12 months, but it does not end every duty or asset process
some debts, including certain fines, student loans and child-maintenance liabilities, are not written off

A creditor can petition for bankruptcy only if the statutory conditions are met, including being owed at least £5,000. That threshold does not create a minimum debt for your own online application.

Home and asset risk

In a protocol IVA

The 2025 protocol removed the requirement to sell the family home or release equity. Home equity instead affects whether the standard term is five or six years. Bespoke IVAs can differ, so homeowners should check the property clauses line by line.

Other assets, windfalls and increases in income may still be covered by the proposal. Jointly owned property and secured borrowing also need individual advice.

In bankruptcy

Your trustee can deal with your beneficial interest in a home and may seek a sale, transfer or payment representing that interest. Reasonable household items and tools needed for work are generally exempt, but valuable vehicles, investments and other non-essential assets may be at risk.

Get advice before transferring, selling or giving away any asset. Transactions at an undervalue or preferences can be investigated.

Income and payment differences

An IVA contribution is based on an assessed budget and can change at reviews. Payment holidays or variations may be possible, but the terms and creditor approval rules matter. If the IVA fails, money already paid is not refunded and creditors may resume collection.

Bankruptcy does not require an income payment in every case. Where there is sufficient surplus income, an agreement or order can run for up to three years. This can continue after discharge.

Employment, business and professional restrictions

Bankruptcy can restrict acting as a company director without permission and can affect some regulated, public, legal or financial roles. An IVA may also need to be disclosed under an employment contract, professional rule or security-clearance process.

Check the exact rules with your employer, regulator or professional body before entering either procedure. Do not rely on a general list of “safe” occupations.

Privacy and credit records

Neither route is private. Both appear on the public Individual Insolvency Register while the relevant listing rules apply. Bankruptcy can involve further public notices.

Both are normally recorded on UK credit files for six years from the start or order date. Completion or discharge does not remove the entry early. Lenders make their own decisions after the record expires.

When an IVA may be considered

An IVA may be worth discussing where:

you can sustain the assessed contributions
creditors would receive a reasonable outcome compared with bankruptcy
you understand the fees and failure consequences
a DRO or another lower-cost option is not more suitable
the proposal’s asset and employment terms are acceptable

The current protocol says an IVA is generally not suitable where total debt is below £7,000 or where affordable payments are very low. This is suitability guidance, not a universal legal eligibility threshold.

When bankruptcy may be considered

Bankruptcy may be worth discussing where:

qualifying debts cannot realistically be repaid
a long contribution arrangement is not sustainable
the asset, home, employment and public-record consequences are understood
a DRO is unavailable or unsuitable
the £680 fee and trustee process can be managed

Bankruptcy is not automatically better simply because discharge is faster. Asset investigations, income payments and some restrictions can continue after discharge.

Questions to take to a debt adviser

Which debts would remain outside each procedure?
What would happen to my home, vehicle, savings and pension?
What payment would be affordable after priority bills and emergencies?
Could my job, business, tenancy or professional status be affected?
Do I qualify for a DRO or another lower-cost solution?
What happens if my income falls or the IVA fails?
How much would creditors receive after IVA fees compared with bankruptcy?

Use a free regulated debt advice service before signing an IVA proposal or applying for bankruptcy.

Frequently Asked Questions

Is an IVA better than bankruptcy?

Not automatically. An IVA may offer a structured alternative to bankruptcy, while bankruptcy may resolve qualifying debts sooner. The right option depends on income, assets, debts, employment and the risks of each route.

Will I lose my home in an IVA or bankruptcy?

A current protocol IVA does not require the family home to be sold or equity released, although equity can affect its length. A home can be at risk in bankruptcy, and bespoke IVA terms may differ.

Which option stays on my credit file longer?

An IVA and bankruptcy are both normally recorded for six years from their respective start dates. An IVA may continue beyond that period if it lasts longer than six years.

Sources checked

Rules and fees checked on 11 July 2026. This page is general information, not regulated debt advice.