Should You Consider Bankruptcy Or An IVA? Which Is The Best Option?


A variety of choices are applicable to individuals whose debt has spiralled out of control. They might think about a debt consolidation scheme – e.g. an Individual Voluntary Arrangement (a.k.a. IVA) – or they may just wish to file for bankruptcy.


As IVAs usually involve repaying debts and can last for five years, while bankruptcy will wipe the slate clean and the bankruptcy period lasts for only 1 year, numerous individuals who are in debt speculate if it’s simpler, less trouble and therefore a preferred option just to declare bankruptcy. However, bankruptcy may have major repercussions that an IVA can evade, so it is imperative to ascertain what is best given one’s specific situation.

Before thinking of doing anything, one should consider contacting a debt info organisation – e.g. the CCCS (Consumer Credit Counselling Service) – and find out what is the best route for them. An IVA advisor should be able to help too, even if an IVA isn’t practical in that person’s circumstances.

If an individual declares for bankruptcy, they can lose all of their assets. Although some assets – e.g. cars and pensions – are exempt, the debtor could lose their house. Those assets that aren’t exempt will be sold, the cash divided among the creditors. Also, numerous institutions are informed, including banks, plus the person’s name will be printed in local newspapers. Not only that, but their credit score will be affected for 6 years, maybe longer. On the bright side, all debts will be gotten rid of completely following on from the one-year Bankruptcy Order period. Therefore, if an individual does not have any assets (e.g. a house) and owes a very large amount of debt, then bankruptcy could be the better route.

The result of getting and finishing an IVA, on the other hand, will be rather different, and could be more appropriate based on a person’s circumstances. They might not lose their home as a outcome (although they may have to re-mortgage the house in order to be able to afford to pay back their debt). Newspapers and banks do not need to know about the specifics. While bankruptcy can affect particular careers, including accounting, meaning a bankrupt individual can’t become an accountant, an IVA mean that individuals in these professions can continue to operate as they are whilst slowly eliminating their debt. Therefore, for people with assets, a steady income and a career that could become affected by being bankrupt, asking for IVA help may be ideal for them. It may last for 5 years, with monthly payments that must be met, but their assets and career won’t be lost.