Is an IVA a better option than bankruptcy?

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Whether you choose an IVA or bankruptcy, there are certain pro’s and con’s for each – which is why it’s important to seek independent and impartial advice before you commit yourself to either option.

In either scenario, IVA’s and bankruptcies are legally binding agreements so they shouldn’t be entered into lightly, nor should they be seen as an easy way out since both have certain implications.

When to choose an IVA over bankruptcy

UK IVA companies such as IVA Online might prove to be more beneficial than bankruptcy if any of the following situations apply:

  • You own your own home (or other assets, such as vehicles, that you don’t want to lose)
  • You have your own business
  • You’re employed in a profession which can result in dismissal for entering into bankruptcy (for example, the armed services, police force or legal profession)
  • You might have to apply for a Power of Attorney on behalf of someone (for example, a parent or other family member)
  • You have some spare income each month (or possibly a lump sum of money) which could be used to make monthly repayments to your creditors. The minimum amount usually required for this purpose is £100.00 per month.
  • You need or prefer to keep using your bank account throughout the arrangement. If you enter into an IVA then there’s no requirement to tell your bank about the arrangement (as opposed to bankruptcy, when you do).
  • You want to avoid bankruptcy if you’re being threatened with it by a creditor

Are there any risks of entering into an IVA?

As with any type of legally binding arrangement, there are naturally certain risks attached to entering into an IVA.

Firstly, if your circumstances are likely to change in the short-term (i.e. your financial position is likely to change) then an IVA might not be the best option since failure to comply with it could lead to bankruptcy. Consequently, if you’re self-employed, undertake seasonal work or claim benefits then your advisor might suggest that an IVA isn’t the best option for you – particularly if you can’t fully commit to meeting the set monthly repayment.

The other risk associated with IVA’s is whether your creditors will agree to one. If this happens then you’ll have to find another alternative.

So what are the advantages of bankruptcy over an IVA?

Bankruptcy might be a better option for you if you don’t own your own home or don’t have other assets which you’d like to retain (such as family vehicles, caravans and so on).

Bankruptcy can also have a distinct advantage over an IVA if you simply don’t have enough disposable income to enter into a regular monthly repayment.

How do I decide which option is best for me?

The best way of deciding between an IVA and bankruptcy is to speak to an independent and impartial advisor. Most advisors and/or firms will offer a free initial consultation so that you can easily discuss any concerns and take some advice on which option might be best for you.