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Individual voluntary arrangement as an alternative to bankruptcy

Mae’r cyngor hwn yn berthnasol i Cymru

Bankruptcy and Individual Voluntary Arrangements (IVA) are formal, legally-binding agreements between you and your creditors. Both have to be approved by the court and your creditors have to stick to them.

There are advantages and risks to both bankruptcy and IVAs. Before choosing the best solution for you, you should find out more about each one. This page gives you an overview of when you might want to consider an IVA rather than bankruptcy.

If you owe money to people or companies in the EU

Any debts you owe people or companies in the EU might not be covered by either an IVA or bankruptcy. 

Your creditors could keep asking you for money, for example by calling you and sending you letters. 

If you live in the EU, they could take you to court in the EU. 

EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020. 

If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU. 

Get legal advice if you have creditors in the EU. Find free or affordable legal help.

When to choose an IVA

An IVA may be preferable to bankruptcy if you:

  • own a home or other assets that you don’t want to lose
  • own your own business
  • may lose your job if you go bankrupt, for example, if you are a police officer or work in the armed forces
  • have, or are considering applying for, a power of attorney on behalf of someone
  • have some spare income each month or a lump sum of money to make repayments to creditors
  • want to avoid any negative social impact.


An IVA is more flexible than bankruptcy and can be set up to fit with your personal circumstances. If you have assets such as a car or other personal possessions, it may be possible to keep these instead of using them to pay your creditors. Your insolvency practitioner will help you negotiate with your creditors to keep these outside the IVA.

Bank accounts

You can continue to use your bank account if you have an IVA. You don’t need to tell your bank about an IVA. If you go bankrupt your bank account is likely to be closed and you may find it difficult to open another bank account.

Creditor is trying to make you bankrupt

If a creditor is threatening to make you bankrupt or has started bankruptcy proceedings, you may be able to get an IVA to avoid the bankruptcy.

Risks of an IVA

It’s important to know the risks involved in an IVA. If your circumstances are likely to change in the short-term an IVA may not be suitable. If you are unable to keep up with the payments, the IVA could fail. If the IVA fails your creditors will be able to take action against you. They could make you bankrupt.

Your creditors may not agree to an IVA. If this happens, you will have to find another debt solution.

If you start IVA proceedings and it doesn’t work out, you will be in a worse financial position because you have to pay fees to your insolvency practitioner.

Benefits of bankruptcy

Under an IVA, you may have to pay more to creditors than you would do if you became bankrupt, and for a longer period.

Bankruptcy may be better for you if:

  • you don't own a home
  • you don't have any spare income to pay your creditors.

Next steps

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