IVA or bankruptcy? The main differences
This guide covers England and Wales
The short answer
Both are formal ways to deal with debts you cannot pay. An IVA is an agreement you pay into for years. Bankruptcy is a legal process that usually ends after 12 months.
Each has costs and risks. This page does not say which one is right for you.
Editorial responsibility: IVAs & Bankruptcy — how we check and correct information.
The comparison
We ask the same questions about each option. Neither one is shown as the better choice.
| Question | IVA | Bankruptcy |
|---|---|---|
| What is it? | A legal agreement with your creditors to pay all or part of your debts through regular payments. | A legal process for debts you cannot pay. Your things and some income can be used to pay towards them. |
| Who sets it up? | A licensed insolvency practitioner. It starts if creditors owed at least 75% of your debts agree. It then covers all your creditors. | You apply online, or a creditor applies to a court. An Insolvency Service adjudicator or the court decides. The official receiver then deals with it. |
| What does it cost? | No set price. Fees are taken from your monthly payments, not upfront. Early payments cover more fees than debt. | £680 to apply. Your spare income and things you own can also be used to pay for it. |
| How long does it last? | A standard (protocol) IVA usually lasts 5 years, or 6 years if your home equity is £10,000 or more. Missed payments can extend it. | Usually 12 months, if you cooperate. An income payments agreement can run for up to 3 years. |
| Could it affect my home? | Under the protocol, you do not need to sell your home or use its equity to pay for the IVA. Other IVAs can differ. | The trustee might sell your home if your equity is more than £1,000, or take a charging order. If they have not dealt with it within 3 years, it usually goes back to you. |
| What shows on my credit file? | 6 years from the date the IVA starts. | Up to 6 years from the date of the bankruptcy. |
| Is it public? | Yes. It is on the Individual Insolvency Register until 3 months after it ends. | Yes. Your name and address are published in the Gazette and on the register. Your name stays on the Land Charges register, usually for 5 years after discharge. |
| What rules do I follow? | For example, no credit over £500 without written approval. You report changes in your pay and tell your practitioner about windfalls. | For example, you cannot borrow more than £500 without telling the lender. You cannot be a company director without the court’s permission. |
| What if I cannot keep up? | The IVA can be cancelled. Creditors can chase you again, with interest and charges that were frozen. You can be made bankrupt. | If you do not pay an income payments agreement, the trustee can act. They can ask your employer to take it from your wages, make you bankrupt for longer, or take legal action. |
| What about my business? | You may be able to keep your business running. | Your business is very likely to be closed, unless the trustee decides to keep it open. |
IVA and bankruptcy side by side
What is it?
- IVA
- A legal agreement with your creditors to pay all or part of your debts through regular payments.
- Bankruptcy
- A legal process for debts you cannot pay. Your things and some income can be used to pay towards them.
Who sets it up?
- IVA
- A licensed insolvency practitioner. It starts if creditors owed at least 75% of your debts agree. It then covers all your creditors.
- Bankruptcy
- You apply online, or a creditor applies to a court. An Insolvency Service adjudicator or the court decides. The official receiver then deals with it.
What does it cost?
- IVA
- No set price. Fees are taken from your monthly payments, not upfront. Early payments cover more fees than debt.
- Bankruptcy
- £680 to apply. Your spare income and things you own can also be used to pay for it.
How long does it last?
- IVA
- A standard (protocol) IVA usually lasts 5 years, or 6 years if your home equity is £10,000 or more. Missed payments can extend it.
- Bankruptcy
- Usually 12 months, if you cooperate. An income payments agreement can run for up to 3 years.
Could it affect my home?
- IVA
- Under the protocol, you do not need to sell your home or use its equity to pay for the IVA. Other IVAs can differ.
- Bankruptcy
- The trustee might sell your home if your equity is more than £1,000, or take a charging order. If they have not dealt with it within 3 years, it usually goes back to you.
What shows on my credit file?
- IVA
- 6 years from the date the IVA starts.
- Bankruptcy
- Up to 6 years from the date of the bankruptcy.
Is it public?
- IVA
- Yes. It is on the Individual Insolvency Register until 3 months after it ends.
- Bankruptcy
- Yes. Your name and address are published in the Gazette and on the register. Your name stays on the Land Charges register, usually for 5 years after discharge.
What rules do I follow?
- IVA
- For example, no credit over £500 without written approval. You report changes in your pay and tell your practitioner about windfalls.
- Bankruptcy
- For example, you cannot borrow more than £500 without telling the lender. You cannot be a company director without the court’s permission.
What if I cannot keep up?
- IVA
- The IVA can be cancelled. Creditors can chase you again, with interest and charges that were frozen. You can be made bankrupt.
- Bankruptcy
- If you do not pay an income payments agreement, the trustee can act. They can ask your employer to take it from your wages, make you bankrupt for longer, or take legal action.
What about my business?
- IVA
- You may be able to keep your business running.
- Bankruptcy
- Your business is very likely to be closed, unless the trustee decides to keep it open.
This compares the main points only. It describes England and Wales. Your own papers, and the terms of any IVA you are offered, may differ. It cannot tell you which option, if any, suits your situation.
A free debt adviser can help you understand which options fit your situation. Find free help
Other options to know about
These two are not the only ways to deal with debt. Look at the others before you decide.
- A Debt Relief Order has no application fee, for people who meet strict rules. The Insolvency Service says someone who could get a DRO is unlikely to suit a standard IVA.
- Breathing Space gives up to 60 days of protection while you get advice.
- A Debt Management Plan, or an informal agreement with your creditors. See the overview.
Who can help you decide
A free adviser can look at your whole situation, which this page cannot do. Ask them about every option, not only these two.
What to do next
A free debt adviser can look at your income, debts and home, and explain which options are open to you. Their advice does not cost anything.
Free, independent debt advice
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Related guides
- What is an IVA?The full guide.
- What does an IVA cost?Fees explained.
- IVA benefits and risksA balanced look.
- What is bankruptcy?The full guide.
- What does bankruptcy cost?The fee and other costs.
- IVA or Debt Relief Order?Another comparison.
- All your debt optionsThe overview.
Sources
- GOV.UK: Options for dealing with your debts, IVAs (checked )
- Insolvency Service: IVA protocol key facts (for people thinking of an IVA) (checked )
- Insolvency Service: IVA protocol 2025 (checked )
- Insolvency Service: IVA protocol 2025, standard terms and conditions (checked )
- GOV.UK: Becoming bankrupt, applying (checked )
- GOV.UK: Becoming bankrupt, after you become bankrupt (checked )
- GOV.UK: Becoming bankrupt, restrictions (checked )
- GOV.UK: Becoming bankrupt, your home (checked )
- GOV.UK: Becoming bankrupt, your money and income (checked )
- GOV.UK: Becoming bankrupt, when bankruptcy ends (checked )
- GOV.UK: Options for dealing with your debts (checked )