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Debt Relief – Insolvency – Bankruptcy Information » Bankruptcy Help » Bankruptcy vs IVAs – Which Should You Choose?

Bankruptcy vs IVAs – Which Should You Choose?

When a person is in debt they often feel that there is nowhere to turn, many hear on the grapevine about IVAs and Debt Management Plans and even bankruptcy, but they do not understand which option is best for them.

At Debt Release Direct, our job is to assess each individual and their circumstances in order to recommend the best debt management solution for them.

The main differences between an IVA and bankruptcy are that the assets are handled in a different way and the home is treated differently, the time periods are different and the employment status has to be considered before choosing each procedure.

An IVA or individual voluntary arrangement is advantageous because it is easier to get a mortgage than with bankruptcy, you can keep control of your assets and you can still be a director of a limited company. With an IVA it is easier to get a bank account and the IVA will leave the customer debt free after a maximum of 5 years, The IVA can write off up to 75% of debt and the IVA can stop the interest on the debt.

With bankruptcy, it will write of 100% and will only last for 1 year however it involves lengthy court procedures and it can be difficult to get a mortgage or bank account.  An IVA may take equity from assets, whereas a bankruptcy will not do this, meaning your assets are safer plus an IVA is unsuitable for people who are unemployed or on benefits, whereas bankruptcy is applicable to people of all circumstance.


When you speak to a Debt Release Direct Advisor, they can give you debt advice and debt help over the phone, assisting you in reducing debt or even to eliminate debt altogether.

If you would like to speak to a dedicated, qualified advisor, please call 08000197465 or visit

Bankruptcy is a legal process which becomes an option when your debts are greater than your assets, and involves writing off all of your debts so you can no longer be chased for them. An Official Receiver will be put in charge of your estate and may sell your assets for the benefit of your creditors. The official reciever will also decide whether or not you can afford to make payments to your creditors for up to three years. Declaring yourself bankrupt can write off all debts, usually in 12 months, but you may struggle to get credit in the future.



Is Bankruptcy right for me?

Before you consider bankruptcy it is vital that you discuss your situation with a professional, as it may have permanent implications on your ability to get credit or certain jobs in the future.

Whilst in many cases it can be the best or only solution to an individual’s debt problem, sometimes it may be better to consider an Individual Voluntary Arrangement (IVA) or other solutions that do not carry the same long-term consequences.


IVA – Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors that you will pay back as much debt as you can afford over a fixed period. Any remaining unsecured debts will subsequently be written off.

If accepted by 75% of voting creditors (by debt value), an IVA will give you complete legal protection from all unsecured creditors, even if they did not vote. A typical Individual Voluntary Arrangement (IVA) lasts for five years and is supervised by a licensed Insolvency Practitioner who must ensure it is fair and reasonable for both you and your creditors.



Example of an IVA: Example only, all costs and fees are unique to your own individual proposal

John can afford to pay £400 each month towards total unsecured debts of £60,000. Over 5 years he pays back a total of £24,000.

After fees of £4,000, a total of £20,000 is paid to his creditors and the remaining £40,000 (66%) is written off.

I am the online marketing manager for Debt Release Direct


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