UK Bankruptcy and IVA comparison

Bankruptcy should only be considered as a last resort. It is a lose-lose situation for you and your creditors. You could be forced into Bankruptcy only if your creditors consider they have a better prospect of recovering what you own them.

Try our Debt Analyser to see if bankruptcy or an alternative solution is more suitable for your situation.

UK Bankruptcy

  • Bankruptcy is always advertised.
    Bankruptcy applications are advertised in the London Gazette and the local paper where you live.
  • Notification is made to everyone financially connected.
    Your bank, building society, creditors, landlord, etc are informed immediately.
  • Bankrupts cannot usually run a business.
    Normally, any business you own will be closed immediately.
  • Future assets will be lost.
    Any asset that might have been acquired during the term of the bankruptcy, such as inheritances, insurance payout's/maturities, equity in property, windfalls, etc., and possibly pension income.
  • All accounts closed.
    Bank accounts, credit cards will be closed. Anything that is being purchased by lease or HP, such as your car, will be immediately returned to its owner.
  • Previous Bankrupts.
    People that have been bankrupt before should be very careful about being made bankrupt again, as the minimum period of bankruptcy is 5 years, and could continue for up to 15 years before being discharged.
  • Professional & Business Status.
    Certain employment situations will be prejudiced by being declared bankrupt, and professional and business status will be lost. Membership of many associations and societies will also be lost.
  • Interview by an Official Receiver.
    You'll be questioned as to how or why you fell into difficulties. If your behaviour was considered to be rash or hazardous, you may be subject to a Bankruptcy Restriction Order.

Individual Voluntary Arrangement.

  • No publicity.
    An IVA is not advertised. There is not the stigma or publicity that normally accompanies bankruptcy. However, there is a government website where registered IVA's can be found.
  • Privacy.
    Landlords or employers are not notified, unless they are a creditor.
  • Does not effect professional or employment status.
    Under certain circumstances, you can still be a company director or practice professional roles involving finance.
  • You have more control over your assets.
    Some assets can be excluded from your proposal. Your advisor will discuss this with you.
  • All contact from creditors should stop completely.
    We'll handle all correspondence while your IVA proposal is being prepared. After which the IVA is legal binding. The creditors should not contact you again. If they do, we'll deal with the situation.
  • Less costs for creditors.
    Administration costs are normally lower than Bankruptcy, enabling higher dividend payments for creditors.
  • Not all creditors need to agree.
    Creditors who vote against the IVA are still bound by it as long as the required majority (75% by value of the debt,) of the creditors who have voted agree to it.
  • No need to attend court.
    You will not be required to go to court for the IVA. Just be available to answer questions on the phone at the time the creditors meeting.
  • Legal Protection.
    Court proceedings can't be brought against you in respect of any of the debts bound by the Individual Voluntary Arrangement. This is provided you maintain the payments agreed in the IVA.

For some, Bankruptcy will be more suitable than an IVA. For example, an IVA normally requires repayments of at least £10,000 over 5 years. Bankruptcy maybe a better option if you can't afford this as it does not require you to make contributions from income for 5 years.

If you qualify for an IVA then this could be your best method to clear all of your debts. Please don't wait until it's too late

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