UK IVA vs Bankruptcy (2026/27): When Each Makes Sense
UK IVA vs bankruptcy 2026/27 in England and Wales: fees, how long each lasts, what happens to your home and car, credit file impact and restrictions.
A comparison of an Individual Voluntary Arrangement (IVA) and bankruptcy in England and Wales for 2026/27: what each costs, how long it lasts, what happens to your home and car, and how long it stays on your credit file. Scotland and Northern Ireland have different processes. Free debt advice is available before you choose either route.
Side-by-side comparison
| Feature | IVA | Bankruptcy |
|---|---|---|
| Cost | Usually a set-up fee plus a handling fee on each payment, charged by the insolvency practitioner - ask for the total before agreeing | £680 application fee (a charity may be able to help if you cannot pay it) |
| How it starts | An insolvency practitioner puts a proposal to your creditors; it starts if creditors holding 75% of your debts agree, and then binds all of them | You apply online to an adjudicator, or a creditor owed £5,000 or more petitions the court |
| How long it lasts | The term set in the proposal, based on what you can afford | Usually discharged automatically after 12 months; an Income Payments Agreement can run for up to 3 years |
| Payments | Regular payments to the insolvency practitioner, who divides them between creditors | Only if the trustee finds spare income and you agree (or the court orders it); not normally asked for if your main income is state benefits |
| Home | An IVA can give you more control of your assets than bankruptcy | If your equity is more than £1,000, the trustee can sell or take a charging order; it usually reverts to you if not dealt with within 3 years |
| Car | Depends on the terms of the proposal | Usually kept if other transport is not practical and you need it for work, household needs or caring - unless it is worth more than a reasonable replacement |
| Credit file | 6 years - GOV.UK says this is the same across the debt relief options | 6 years from the date of the bankruptcy |
| Public record | Individual Insolvency Register, removed 3 months after the IVA ends | Individual Insolvency Register and the Gazette |
| Main restrictions | The insolvency practitioner can cancel the IVA and make you bankrupt if you stop paying | Cannot borrow more than £500 without telling the lender, or act as a company director without the court's permission |
Decision framework
An IVA may fit when
- You can afford regular payments for the whole term
- You want more control of your assets than bankruptcy gives
- You need to avoid the bankruptcy restrictions (for example on acting as a director)
- You understand that missing payments can lead to bankruptcy
Bankruptcy may fit when
- You have little or no spare income
- You have little or no equity in a home
- A Debt Relief Order is not available (for example, debts of £50,000 or more, or assets of £2,000 or more)
- You want the debts dealt with on a 12-month discharge timetable
Related guides
- UK Debt Relief Order 2026/27 - no fee, for smaller debts and low spare income.
- UK Debt Prioritisation 2026/27 - priority debts + free advice.
- UK Credit Score 2026/27 - rebuilding post-insolvency.
- UK Mortgage Affordability 2026/27 - post-discharge mortgage access.
Frequently asked questions
What is an IVA?
An Individual Voluntary Arrangement is an agreement with your creditors to pay all or part of your debts. You make regular payments to an insolvency practitioner, who divides the money between your creditors. The practitioner works out what you can afford and how long the IVA lasts. It starts if creditors holding 75% of your debts agree, and then applies to all of them, including those who voted against. It stops creditors taking action against you for the debts it covers.
What is bankruptcy?
You can apply to become bankrupt online for a £680 fee, or a creditor you owe £5,000 or more can ask the court to make you bankrupt. A trustee (usually the official receiver) can sell valuable possessions and use spare income to pay your creditors. While bankrupt you cannot borrow more than £500 without telling the lender or act as a company director without court permission. You are usually discharged after 12 months; an Income Payments Agreement can last up to 3 years and continues after discharge.
When does an IVA make more sense?
An IVA can suit someone who can afford regular payments for the length of the arrangement and wants to keep more control of their assets than bankruptcy allows. It also avoids the bankruptcy restrictions, such as needing court permission to act as a company director. Its risk is the length of the commitment: if you stop paying, the insolvency practitioner can cancel the IVA and make you bankrupt. Get free debt advice before choosing.
When does bankruptcy make more sense?
Bankruptcy can suit someone with little spare income and few assets, who cannot sustain long-term payments. Check a Debt Relief Order first: it is free and is generally available if you owe less than £50,000, have less than £75 a month spare income, have less than £2,000 of assets, do not own your home and do not own a vehicle worth £4,000 or more.
How much does an IVA cost?
GOV.UK says there are usually two fees: a set-up fee and a handling fee each time you make a payment. Both are paid out of the money you pay in, so they reduce what reaches your creditors. Find out the total cost before asking an insolvency practitioner to act for you. Free debt advice is available through MoneyHelper.
What happens to my home in bankruptcy?
If your equity is more than £1,000, the trustee can either sell the property or apply for a charging order. A partner or someone else may be able to buy the equity to stop a sale, and a sale can be delayed for up to a year to rehouse children or a partner. If the trustee applies to the court for a sale more than a year after your property first vested in them, the court must assume that the creditors' interests outweigh all other considerations unless the circumstances are exceptional (Insolvency Act 1986 s.335A(3)). If the trustee has not dealt with the home within 3 years, it usually transfers back to you.
Can I be made bankrupt against my will?
Yes. A creditor can petition the court if you owe £5,000 or more and do not pay, usually after a statutory demand or a court judgment. You have 21 days to respond to a statutory demand, and 18 days to apply to challenge (set aside) it if you were in the UK when you got it. You can oppose a bankruptcy petition at least 5 days before the hearing. The £5,000 bankruptcy level in Insolvency Act 1986 s.267 has applied since 1 October 2015 (SI 2015/922).
How do I rebuild credit after an IVA or bankruptcy?
Credit reference agencies take the end of a bankruptcy from public records rather than being told directly, so get a copy of your credit report and ask the agency to update it if needed. The bankruptcy can stay on your credit file for 6 years from the bankruptcy date. Your name usually leaves the Land Charges register after 5 years. After that, rebuilding depends on paying any new credit on time.