IVA or bankruptcy? The differences explained

Both are formal insolvency procedures that end with debts being written off, and both go on the public register and your credit file. The differences are in how long they last, what they cost, and how much control you keep over your home, your car and your working life.

This is general information, not a recommendation. Free, impartial debt advice is available from MoneyHelper, StepChange, Citizens Advice and National Debtline if you want someone to go through your own figures. See where to get free debt advice.

IVA and bankruptcy side by side

Figures are for England and Wales. IVAs are also available in Northern Ireland, but not in Scotland: see debt solutions in Scotland.

What happens to your home?

This is the difference that has changed most recently.

Under the IVA Protocol 2025, which applies to protocol IVAs from 1 July 2025, you are not asked to sell your home or release equity. Your equity is worked out as 85% of the property’s value minus the mortgage. If your share is £10,000 or more, the IVA runs for 72 months instead of 60, in place of your equity. IVAs agreed before 1 July 2025 keep their own terms, which for homeowners could include an attempt to remortgage around month 54.

In bankruptcy, if your equity is more than £1,000 the trustee can sell the property or take a charging order. Your partner or a relative may be able to buy your share, and a sale can be delayed for up to a year if children or a partner need time to find somewhere else. If the trustee has not dealt with the home within 3 years, it usually reverts to you.

If you rent and are up to date with your rent, gov.uk says it is unlikely you will be asked to move out because of bankruptcy, so the home question matters much less.

Which costs more?

Bankruptcy costs £680 upfront, which is a real barrier for many people. After that, the Official Receiver’s fees come out of whatever the trustee collects, not from you directly.

An IVA has no upfront fee, but fees for the insolvency practitioner are taken from your monthly payments, and your first payments go mostly on fees. There is no legal cap. Citizens Advice says IVA fees are around £5,000 on average.

On those figures bankruptcy costs less. But the comparison changes if the person owns a home with equity, needs a valuable car, runs a business or works somewhere that bankruptcy would affect.

How do they affect your job or business?

An IVA does not, by law, stop you being a company director. Bankruptcy does, unless the court gives permission. If you are self-employed, gov.uk says bankruptcy will very likely close your business unless the trustee keeps it open. An IVA lets you keep trading, although the IVA Protocol says a sole trader with trade debts is unlikely to be suitable for a standard protocol IVA, so a bespoke IVA may be needed.

Some employers and professional bodies have their own rules about insolvency, and some treat IVAs and bankruptcy differently. Check your contract or your professional body’s rules before choosing either.

What if it goes wrong?

About one in three IVAs registered between 2016 and 2018 ended up being terminated. If an IVA fails, your creditors can chase the full balances again, including interest and charges frozen during the IVA, and the supervisor or a creditor can petition for bankruptcy. You do not get back what you have already paid. Our guide to what happens if an IVA fails explains more.

Bankruptcy cannot “fail” in the same way, but it can be extended if you do not co-operate, and dishonesty can lead to a bankruptcy restrictions order that keeps the restrictions going after discharge.

Who does each usually suit?

In general, an IVA is more often considered by people who have a regular, sustainable income, who own a home with equity they want to protect, who are company directors or self-employed, or whose jobs would be affected by bankruptcy. The IVA Protocol’s usual profile is debts of £7,000 or more with a regular income that is not mainly state benefits (guidance, not law).

Bankruptcy is more often considered by people with no realistic prospect of repaying within a reasonable time, few assets, and a job that bankruptcy would not affect. The Insolvency Service’s own research in 2026 noted concerns that bankruptcy costs are high, and the £680 fee puts it out of reach for some.

Two more points to be fair both ways:

• If you have low income and few assets, a debt relief order may be available for free, and the IVA Protocol says people who meet the DRO criteria are unlikely to be suitable for a protocol IVA.
• If you could clear your debts through a debt management plan in a similar time, an IVA is also unlikely to be suitable.

For the wider picture, see debt solutions compared and bankruptcy explained.

What to do next

1. Work out your equity, if you own a home, and list anything valuable you own.
2. Check whether your job, directorship or professional membership has rules about insolvency.
3. Get advice on both options with your real figures. An insolvency practitioner will assess whether an IVA is suitable, and a free debt adviser can also help with bankruptcy. If you use our checker, we may pass your details to a licensed insolvency practitioner or debt adviser.