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IVAs and bankruptcy: what's the difference?

The Telegraph features a report comparing IVAs (Individual Voluntary Arrangements) and bankruptcies. Both of these debt solutions are a form of insolvency. However, IVAs were introduced as an alternative to bankruptcy and differ from bankruptcy in a number of ways.

Before entering into an IVA or bankruptcy, debtors should be aware that both would be noted on their personal credit file for six years and that credit reference agencies don't really distinguish between the two debt solutions.

However, bankruptcies differ from IVAs in the following ways:
• A bankruptcy requires the debtor to repay what they can, by the sale of their assets. Usually after one year, the debt is written off and debtor is 'discharged'. An IVA is a legally binding agreement between lenders and a debtor, where the debtor agrees to repay the debt over a fixed term - usually five years.
• Those going through bankruptcy may lose assets, including their home. Those on an IVA may be required to release equity in their home.
• Bankruptcies are published in the newspapers. IVAs are listed on the Insolvency Register, available on the Insolvency Service website.
• Following a bankruptcy, a 'bankruptcy restriction order' could be placed on an individual if it was found that they intentionally borrowed money they knew they couldn't repay, which could restrict their finances for up to 15 years following the bankruptcy.

The report advises anyone considering an IVA or bankruptcy to seek advice before making a decision.