What is the difference between bankruptcy and an individual voluntary arrangement (IVA)?

December 6, 2017

When you’re dealing with serious levels of debt, it’s natural to consider declaring bankruptcy as a way to escape a seemingly unmanageable situation. But other options do exist that might help you deal with your debts, and build a better financial future. One of these options is another formal insolvency procedure called an individual voluntary arrangement, or IVA.

IVAs were introduced by the government in 1986, as an alternative to bankruptcy. They offer those in debt a chance to repay creditors as far as possible over an extended period of time, with any debt remaining being written off at the end of the term.

Although similar in nature to bankruptcy, significant differences do exist between the two processes.


If you’ve complied with all the requirements of the bankruptcy order, and co-operated fully with the trustee, you’ll generally be discharged from bankruptcy after 12 months. Should you make monthly repayments in addition to handing over your assets, you may need to continue these for up to three years.

In comparison, an IVA can last for up to six years. If you have equity in a property, the term is generally five years, otherwise you’ll have to make further monthly repayments for an additional 12 months.

Effect on your home

If you enter bankruptcy you hand over control of your home to the trustee, who may need to sell it for the benefit of creditors. Although there’s a greater chance of losing your home in bankruptcy when compared with an IVA, this depends on the level of equity available.

An IVA doesn’t necessarily involve selling your home, but you may be asked to release equity at year five. If there is insufficient equity available to make this worthwhile, or your property is in negative equity, the IVA term may be extended by a year. Releasing equity may prove challenging in itself, however, as lenders could be reluctant to approve additional borrowing considering the nature of your existing financial position.

Application process

You can enter bankruptcy by petitioning the court, after which a bankruptcy order is made. A trustee is then appointed to administer your bankruptcy – essentially, they collect in and sell your assets to repay creditors.

An IVA application must be made by a licensed insolvency practitioner (IP) who presents a proposal to your creditors regarding repayment of their debts. If this is accepted by 75% of the creditors (by value of debt), the individual voluntary arrangement becomes legally-binding to all parties.

Fees and costs

You’ll need to pay the bankruptcy fee yourself on the day the bankruptcy order is made. In contrast, a pre-agreed percentage of the IVA payments is taken to pay the nominee and supervisory costs of administering the process.


Both bankruptcy and IVA processes are publicly recorded in the Individual Insolvency Register, but a notice of your bankruptcy is also placed in the Gazette. This means it’s more likely that people you know, such as your employer, will become aware of your financial situation.


Your employment may be affected by bankruptcy, particularly if you work in certain professions such as finance and legal, in the police force or prison service. Additionally, you’re not legally allowed to take on certain offices or roles, such as local government councillor, limited company director, or pension trustee.

An IVA may have less impact in terms of general employment, but you should always check your employment contract for further indication as some employers don’t allow insolvency of any kind.

Choosing between an individual voluntary arrangement and bankruptcy largely depends on your individual circumstances, so it’s vital to seek advice from a professional. They’ll help you to make an informed decision, ensuring you understand the relative merits and drawbacks of each procedure.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

Why Choose Us?

  • Speak direct with a qualified adviser
  • We do not operate call centres
  • Head office in Belfast - National Coverage
  • Home visits also available
  • Fully regulated advisers and Reputable Firm
  • Helping thousands of individuals since 2010
Our Insolvency Practitioners
are regulated by ICAS or IPA
Home Visits also Available

Contact Form -

    Can we leave a message?
    • captcha

    Here at Northern Ireland Debt solutions we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See our PRIVACY POLICY