Why Right Now, the Choice Matters More Than Ever
For many people struggling with unmanageable debt, two terms keep cropping up: bankruptcy and Individual Voluntary Arrangement (IVA). Both are serious legal processes, both can offer a way out when debt feels overwhelming, and both carry long-term consequences.
But the decision between them isn’t a simple matter of preference. With household borrowing rising at its fastest pace in nearly a year and the cost of living still straining budgets, knowing which option fits your circumstances has never been more important.
The current climate: why timing matters
UK consumer credit is up 7.1% compared to last year, according to the Bank of England. This means more people are leaning on credit cards, loans, and overdrafts just to keep day-to-day life going. Add in energy costs and the looming expense of winter, and it’s easy to see why people are asking: “Do I need to take formal action?”
Choosing bankruptcy or an IVA now could be the difference between drawing a line under your debts quickly, or committing to a longer-term repayment plan. Both have advantages, but they suit very different situations.
Bankruptcy: a fresh start, at a price
Bankruptcy is often seen as the “nuclear option,” but in reality it can be the fastest way out of debt. It usually lasts 12 months, after which most remaining debts are written off.
The upsides:
- Debts are cleared relatively quickly.
- Creditors must stop chasing you.
- You can focus on rebuilding your financial life without the constant burden of arrears.
The downsides:
- You may lose certain assets, such as your home or valuable possessions.
- Your credit rating will take a significant hit for six years.
- Some jobs or professional positions may be affected.
Bankruptcy is generally more suitable for people with little realistic chance of repaying their debts, or where the total owed is simply too large to manage over time.
IVA: structured repayment with protection
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors. Instead of wiping the slate clean straight away, you commit to making affordable monthly payments, usually for five to six years. At the end of the IVA, any remaining unsecured debt is written off.
The upsides:
- You can usually keep your home and key assets.
- Creditors can’t take further action as long as you stick to the plan.
- You make one manageable payment, agreed based on your income.
The downsides:
- It ties you in for several years, which can feel restrictive.
- Missing payments can cause the IVA to fail, reviving your debts.
- Your credit file is impacted for six years.
An IVA often suits people with steady income who could repay part of their debt, but not all of it.
How do you decide?
The choice between bankruptcy and an IVA depends on your personal circumstances:
- Do you have assets to protect? If you own a home or car you want to keep, an IVA may be preferable.
- Is your income stable? If you can commit to monthly payments, an IVA could work. If not, bankruptcy may offer a cleaner break.
- How quickly do you want closure? Bankruptcy resolves debts in about a year. IVAs stretch over several.
- What about your career? Some professions (finance, law, accountancy, directorships) may have restrictions on bankrupt individuals.
Why waiting is risky
Many people put off making a decision, hoping things will improve. But with winter costs looming and borrowing at record highs, delays can mean debts grow larger and stress grows heavier. By acting now, you can make the choice from a position of relative control rather than crisis.
The role of professional advice
No blog can replace a tailored conversation with a qualified debt adviser. At Adcroft Hilton, we review every client’s unique situation: income, assets, family circumstances, and future goals. Only then can we help decide whether bankruptcy, an IVA, or another route entirely is the right move.
Both bankruptcy and IVAs can provide a lifeline. Neither is “better” across the board, the best option depends entirely on your circumstances. What matters most is not waiting until the decision is forced upon you. With borrowing at record levels and winter costs approaching, now is the time to weigh up your options and take back control. For advice please get in touch.
Adcroft Hilton: Debt, Insolvency & Bankruptcy Specialists
Helping you make the right choice for your financial future.
