Credit-rating agencies do not make much distinction between an IVA and a bankruptcy case.
One of the biggest set backs with bankruptcy is that you may lose your assets – including your house – but the IVA process is different. You may have to give up some of the equity in your house, but you will not necessarily lose the roof over your head.
Bankruptcy is also public matter – legally, there are some people that must be informed, such as your bank. It will also be published in newspapers, so you will not be able to control who finds out. An IVA is a more private option. While your IVA will be published on the Insolvency Service Website, it will not be published in any newspapers.
But going bankrupt can take the pressure of creditors away from you. You are allowed to keep certain things, like household goods and a reasonable amount to live on. When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In many cases, this can be after only one year.
The downside is that even when you are no longer bankrupt, you could have another order (called a “bankruptcy restrictions order”) made against you. These orders can be made if, for example, you took on debts knowing that you had no hope of paying them back. A bankruptcy restrictions order can last for 15 years and will make your financial affairs very restricted – even when you are no longer bankrupt, there are some debts such as court fines and student loans that will never be written off.
Remember that the set up costs of an IVA can be high and you may have to pay an upfront fee. You can also only take out an IVA if you can afford to repay some of your creditors – and if you don’t keep to the payments, you can be made bankrupt anyway.