This page compares IVAs and bankruptcy. If you want all the details on each, read up about IVAs and about bankruptcy. But looking at the pros and cons of each doesn’t always help you decide what to do, so this article compares the two.
This is a very big decision to take – it can feel like you are being asked to predict the future. No-one knows exactly what will happen, but often you can work out what is more likely to be important for you and your family.
There is a third type of insolvency – if you owe less than £50,000 and are renting, see if you meet the criteria for a Debt Relief Order. DROs are better (cheaper, simpler, quicker) than either bankruptcy or an IVA.
Three “easy” cases
For some people the choice between bankruptcy and an IVA is actually easy if you focus on the important things:
You have no assets to protect
If you don’t have any assets to protect and your job would not be affected by bankruptcy, then bankruptcy is the obvious choice.
If you have nothing to protect, then an IVA has no advantages for you! And the disadvantages are that you will pay more, over a longer period and it can go wrong and fail.
Your well-paid professional job would be affected by bankruptcy
Here you should probably focus on an IVA. Also if you have complicated assets that you want to protect – shares in an unlisted family company, that sort of thing. You are the sort of person that an IVA was designed for.
But very few jobs would actually be affected by bankruptcy, so find out the facts and don’t assume yours will be. Also in some financial services jobs an IVA is just as big a problem as bankruptcy is!
Your income/health/family situation isn’t stable
If you have poor health, your job is vulnerable or your income is very variable then bankruptcy is usually a better choice because IVAs are not flexible arrangements.
This also applies to your family situation. Five or six years is a long while and an IVA will often become unmanageable if you have a baby. If you have teens, what will happen to your budget when child tax credit and child benefit stop? What if a child goes to uni but can’t get a full grant as you are expected to contribute?
What is most important for your situation?
If none of those three clear situations applies to you, think about which of the following points matters most for you and your family.
“I want it all sorted and over with, I need a fresh start”
That would be bankruptcy. Your bankruptcy cannot fail, an IVA can. IVA failure rates are very high – it looks as though more than 20% of IVAs may be failing. That is a very high figure. Especially as some IVAs that recorded as “succeeding” have only managed this because someone in the family paid a settlement figure to stop the IVA failing.
Also monthly payments:
- although you may have to make monthly payments in bankruptcy, that will only be for three years
- in an IVA you are committed to repayments for five years and for many people this gets extended to six – if you are supposed to remortgage to release equity in the last year and can’t get a mortgage offer.
“I want any monthly payment to be affordable”
A lot of people are happy to pay a reasonable amount but don’t want to commit themselves and their family to a longer and more difficult struggle than is necessary
Bankruptcy payments are much more flexible than IVA payments:
- if all your income comes from benefits, you won’t have to make ANY monthly payments if you go bankrupt;
- in 2018, five out of six people who went bankrupt didn’t have to make any monthly payments at all;
- if your income drops or your expenses rise in bankruptcy, your monthly payments are reduced, to zero if necessary
- an IVA is not so flexible. Creditors may have to approve reductions in what you pay if they are large. And your IVA firm will not want the payments to fall below £50 a month.
Do not believe any firm trying to sell you an IVA who says that an IVA is flexible. Sometimes you can reduce your IVA payments. If you are paying £350 a month, your creditors may agree to take a lot less. But if you are paying less than £120 a month then there is very little room to cut this so your IVA may fail.
“I can’t afford the bankruptcy fees”
This is not a good reason to choose an IVA.
The bankruptcy fees are stupidly high – after all you need to go bankrupt because you don’t have hundreds of pounds in your bank account.
But if this is the only reason to choose an IVA, then you are opting for a very difficult five years instead of a few difficult months. Save up the £120 you would be paying into an IVA for 7 months and you have the bankruptcy fees. Read this article on where to get help with bankruptcy fees.
“I don’t want anyone to know”
The names of people going bankrupt, going for an IVA or a DRO are all published on the same Insolvency Service website. There is little difference between an IVA and bankruptcy in this respect.
(Bankruptcy used to be more widely publicised, with notices in local newspapers, but now this is very rare unless you have a local business.)
“I want to stay in my house and there is no-one to buy the equity from the OR”
Are you sure? Don’t walk into an unsuitable IVA because you don’t want to have a difficult conversation with your parents or your brother – it is possible to keep your house if you go bankrupt and many people do. If you have negative equity, for example.
If your house has equity, that is a big reason to favour an IVA.
But although you won’t be made to sell your house in an IVA, since 2014 most IVAs have a “secured loan” clause which says you have to release equity by remortgaging or getting a secured loan in your last year … here is the horror story of someone who was told he had to take a 15 year secured loan at 19%.
And also think about your mortgage costs going up while you are in an IVA, when does your current mortgage fix end? If you have a Help To Buy mortgage, when will you have to start making payments to the government? Your IVA must explain what will happen when your mortgage payments increase – do not believe an IVA firm that says that can all be sorted out at the time.
Because of this, an IVA is often no longer a good choice if you have a house.
“I would lose my car if I go bankrupt”
This isn’t a good reason to lock yourself into five years of high IVA payments. If your car is sold in bankruptcy and you need a car to get to work, you will be given money to buy a cheap second-hand one.
If you have a car on PCP finance, then how will you manage if that ends during your IVA? At that point your credit record will be wrecked and you may have to get a car on bad credit finance at 40%+ interest…
“I want to be able to get back to a good credit rating”
There is a lot of rubbish on the internet about your credit record never recovering from bankruptcy. The process of repairing your credit file after an IVA or bankruptcy is exactly same – it is no more difficult after bankruptcy than an IVA.
“I’m worried about getting a mortgage in the future”
Read Bankruptcy, IVAs and DROs – their effect on your credit records for details on this – because although bankruptcy can make it harder to get a mortgage, so does an IVA. Many high street lenders ask if you have ever been insolvent – you have to reply yes whether you had an IVA or bankruptcy.
Conclusion – making the decision
If you are still undecided, then one way forward that might help you is to talk to StepChange about the amount that you would pay in an IVA. Once you know that, try to live off that for a couple of months whilst you think the decision through. If you find those two or three months easy, then you will feel more comfortable about signing up for the longer term, inflexible IVA; if you find managing on that money hard then bankruptcy is probably better for you.
Taking a few months to make the right choice is sensible, but don’t delay too long though – an endless Debt Management Plan isn’t a good option either.
Websites that make bankruptcy sound scary
Can’t pay your IVA this month?
Inherit in a DRO, IVA or bankruptcy
Martyn says
I love your site …so so much useful unbiased info..thnks ! I am trying to decide between Bankruptcy and an IVA ..I note you say that the monthly payments under a bankruptcy IPO may be less than those under an IVA..I am unclear how this can be since dont both just look at your income and expenditure and any excess has to be paid monthly? ..and wouldnt an OR and an IVA insolvency practitioner both use the same income/expenditure allowable guidelines ? any help you have on this would be much appreciated…big thanks !
Sara (Debt Camel) says
IPs don’t have to use the Standard Finanical Statement guidelines that the OR now uses.
One significant difference is costs associated with disabilities. These are largely ignored in an IVA.
But if you have no assets, the biggest difference is the 3 years vs 5 years. Also that if your situation gets worse in bankruptcy, any monthly payments can be reduced or ended – but an IVA may fail.
Steve says
I have around 6k of debt and a joint HMRC overpayment of tax credit of £9k with my wife
Ideally I would like to avoid IVA or Bankruptcy, but I need a ideal solution to clear the debts without breaking the bank further long term
Sara (Debt Camel) says
Hi Steve, if you are still getting tax credits, the overpayment should be deducted from those. If you think too much is being taken, go to your local Citizens Advice and see if they can get the repayment rate reduced. They will also be able to suggest options for your other debts – those are low amounts to be considering bankruptcy or an IVA for. And with HMRC being easily your biggest creditor it could be hard to get an IVA agreed.
Steve says
Hi
We don’t receive credits any more and it’s the HMRC debt that’s driving towards an Iva
Sara (Debt Camel) says
I suggest you talk to StepChange about your options. They can arrange IVAs if necessary, but if HMRC vote against your IVAs (both you and your wife would need one) then they would be able to veto one.
captain chaos says
Hello,
I would really use a advice regarding my situation. 2 years ago I’ve lost my wife and have two small children (3 and 6). Since then i was going more and more in debt. There is now around 35k mostly in big banks in form of personal loans. I’m working part time and my disposable monthly income is around £100 (depends who and what calculation are used…..one insolence company said a got non disposable income and other told me i got around £200 ) . The only asset i actually got is vehicle worth around £5000. I I rent house from house association (social tenant). I’m mentally exhausted and drained. I’m Polish nationality and been living in uk around 15 years. Due to no family around and not a lot of support i’m considering moving back in year or two to my country living back with my mum (failure and disappointment because i was hopping for good future form my kids in UK but being single dad with no family hear starting to putting burden on me).
Basically im lost and don’t know what option to choose from : IVA or Bankruptcy
Sara (Debt Camel) says
A lot depends on what your disposable income actually is per month. I think you should talk to National Debtline on 0808 808 4000 and say you have had two very varying estimates from Insolvency Practitioners and you would like their help to work out what it should be.
If it is close to zero, then signing up to an IVA which requires you to make monthly payments for 5 years would be a huge mistake as you would struggle for 5 years and the IVA could well fail – more than a quarter of IVAS do! This would mean you just end up with your debts again.
The main problem with going bankrupt is that you would lose your car and be given £1000 to buy a cheaper one if you need a car. If you don’t mind this, then an IVA has NO advantages over bankruptcy and many disadvantages. One option would be for you to sell the car now, put £680 aside for your bankruptcy fees and also pay for any essentials you currently need. I’m not saying go mad with the rest, but look at any essentials you are short of. Then go bankrupt.
The choice about whether to go back to Poland though is the big one, and it’s not really debt related. Having family around can be a priceless asset for a single parent. I will say that things do get easier after a few years (my own husband died when my children were 5 and 3, so that isn’t just a guess…) but only you can make this decision.
If you went bankrupt and didn’t have any worry about your debts, would you be able to work less hours and would that help your stress level?
captain Chaos says
Thank you for advice…..sorry to hear that you lost your husband. You probably understand me more then others. I think i got to rock bottom (i hope) and now the only way is UP that is way i don’t want make quick and silly decission in already bad situation.. ….i’ve spoke to National debtline….i’m waiting now for insolvency company to ring me back. I think if i would negotiate £100 p/m then i would be able to afford IVA and maybe if i decide after 2 years that i have enough i need to go back then i could still probably maintain payments from Poland….so my Plan is to wait for creditors and wait if they even accept my proposal (due to my reckless spending i doubt it) ….if the IVA is fixed price and accepted then pay it for as long as possible…Question is if IVA agreement will let me go back to Poland if i will be still making payments and will IVA will let me move away to my Country with my car due to fact that i will need in day to day living and hopefully travelling to work if i will wind one ? is there a possibility that paying 24 months somebody from friends or family can bay me out in one go for other 36 months ?
Sorry for million of questions
Sara (Debt Camel) says
“if the IVA is fixed price and accepted then pay it for as long as possible” IVAs aren’t fixed price – the amount you pay will increase if you get extra overtime or your expenses reduce. But leaving the country shouldn’t be a problem.
Did national Debtline think you could afford £100 a month?
“is there a possibility that paying 24 months somebody from friends or family can bay me out in one go for other 36 months ?” well yes, but that doesn’t really make sense as a plan. It would be far simpler to get a cheaper car now and go bankrupt. Then your family could help you out with another car later if you need one.
captain chaos says
Thank you Sara…last one i promise :)
It just sounds a bit scary dealing with official receiver and IVA sounds a bit easier. Really i don’t care about a car and i would like to have new start for me and my kids….are IPA payments are fix if decided through 36 months ? i just worry if OR will look on my outgoings realistically or by book, what i mean by that is for example there is 13 weeks off school in a year and i have only 20 days hollidays….summer hollidays is 6 weeks…i had to fly to poland leave the kids with grandmum…come back to work…then do the same on the end of hollidays … not mentioning me or kids being ill through the year…..Payplan told me i got -£90 so they cant offer IVA and national debt said a got about £ 120 …..just all confusing ………but i think you right maybe i just stop overthinking and go in hands of Court
Massively appreciate your time and help with this
Sara (Debt Camel) says
IPA payments are flexible, much more so than IVA payments, but not normally month to month…
I normally suggest getting on with insolvency. But you could decide to just set up a debt management plan for a few months (Payplan would probably do this) then make a decision about whether to go back to Poland? That would let you stop thinking it about it now – after a few months it may be that it’s clear that you do or don’t want to go back to Poland. Then having made the important decision, you can sort out a plan for your debts.
Patrick says
I’ve recently entered into a IVA but don’t think it is as sustainable in the long term as it was made out to be. There are some foreign debts included in the IVA. Am I able to go bankrupt while in a IVA?
Will the application be accepted if foreign debts are involved?
I am possibly starting a new job soon with a better salary but the commuting will cost more. Will the OR have a issue with monthly train tickets?
Sara (Debt Camel) says
You IVA would have to “fail” before you can go bankrupt. This may be the best option for you but you need to be sure, especially if you are expecting your situation to improve in the near future.
Can you say what your total debts are in the IVA and how much you are paying each month at the moment? Are you buying or renting? Do you own a car worth more than £1000 or have any other assets (not counting ordinary household goods).
If you do go bankrupt, the OR will have no problem with whatever your commuting costs are. And foreign debts can be included but you would need to check about the specific details.
Patrick says
Total debts are £65000 and monthly payments are £355 a month.
I am currently renting and have a car on HP which I was allowed to keep as part of the IVA agreement.
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0808 808 4000 about whether bankruptcy would be a better alternative for you, including looking at your possible job change.
Steve says
I have a creditors meeting scheduled for the 7th January for an IVA
After reading this I am now thinking of bankruptcy
Any pointers please
Sara (Debt Camel) says
This is the time to have a hard think… can you say some more about your family and your debt situation?
Steve says
Hi
My debts total around £21k
I am about to change job which will come with a company vehicle
I have a car on finance which my wife needs to do school runs and her part time job.
Due to her medical condition the car needs to be reliable so a cheap runaround is a non starter
Thanks
Sara (Debt Camel) says
The car finance, when does it end? is it simple HP, PCP (with a large payment at the end) or leasing? Can she pay for it out of her earnings?
And will you be getting a payrise, if so is this factored into your proposed IVA monthly payment?
Steve says
The car finance ends in 4 years time
There is no balloon payment it’s a straight forward HP Plan
There is no increase in salary in the change of job
Regards
Sara (Debt Camel) says
The first thing you need to do is read “The car finance company may end your contract” in https://debtcamel.co.uk/car-finance-iva/ and try to find out if your HP company is likely to do this. A surprising number of IVA firms don’t point out this sort of problem to someone before the IVA is agreed.
NB if the finance company will repossess the car in an IVA it will also do this in bankruptcy.
If the car is likely to be repossessed you need to work out if this means you have to avoid both and IVA and bankruptcy or you still want to go ahead but you have another plan to cope if the car is taken.
Assuming the car won’t be taken…
Can you partner afford to pay for the car from her earnings? If she can, this won’t be a problem for your bankruptcy. If she can’t, it may still be OK in bankruptcy if the Official Receiver is likely to say it is needed because of her health or the needs of your family. Talk to National Debtline (https://www.nationaldebtline.org/EW/Pages/default.aspx – make sure you are talking to them not some commercial firm with a misleadingly similar name!) about this. They won’t be able to give you a guarantee about this but they should be able to say if you are likely to have a problem with it. They can also give general advice on whether bankruptcy or an IVA is a better option for you.
Also are you clear what happens at the end of the car HP in an IVA? You need to be sure there will not be a requirement to sell it. Your IVA payments may increase by the amount you are no longer paying on the HP.
Steve says
The contract reads the under insolvency the agreement is terminated
As long as I do not miss any payments during the 4years then the car remains with me.
The IVA payments will increase at the end of the HP so I aware of that already
Thanks for the input..
Sara (Debt Camel) says
“The contract reads the under insolvency the agreement is terminated
As long as I do not miss any payments during the 4years then the car remains with me.” Sorry that isn’t quite clear. Is that second line part of the “under insolvency” clause?
Ian says
Hello. Me and my partner have 2 (young) children but we have managed to accumulate total debts of 90k between c/cards and loans, all separately no joint debts. We have spoken to citizens advice & stepchange, we are due back with citizens advice soon for a follow-up. My partner is willing to go bankrupt as no assets are in her name, our home is in my name as I bought it before we met and both cars are in my name (both owned from second hand). However, my partner wants me to apply for IVA. I do understand why as this would offer stability for the children however the IVA worries me based on reports and comments on here. The house needs a lot of work cosmetically and structurally and I can’t help but think we will tie our selves in long term for a lot more compared to the bankruptcy. The possibility of a high remortgage plan or secured loan in yr5 of the IVA could end up costing us more long term and leave us in a house that would be harder to sell (assuming we have no disposable income throughout the IVA for improvements). We have been offered accommodation with parents if needed or possibly private renting. I personally believe a quicker less painful option is bankruptcy as we’re not stuck with high debts through remortgage or loan and a house that requires major work. Is it highly possible we will get stuck with longer-term issues opting for an IVA if the IP opts for a secured loan? Thanks
Sara (Debt Camel) says
Sorry quite a few questions…
– how do the 90k debts split between you and your partner? are you up to date with all the consumer debts at the moment?
– do you both earn about the same? how large are your childcare costs and when are they likely to reduce?
– you don’t mention any non-consumer credit debts – mortgage arrears, bills etc. I assume there aren’t any.
– how much equity is there in your house, be realistic about a sale price?
– how large is your mortgage, when does it end? repayment? fixed rate?
– what is the “structural” work that is likely to be needed on the house in the next 8 years?
– is this house right for you for the next 8 years while your family is growing up – right place for jobs and school? large enough?
– any thoughts of having another child or other major changes in your lives?
– how much are the two cars worth and are they both essential?
Ian says
Thanks for the reply;
-the split is approx 37k for me 55k for my partner
-i currently work with an income of 28k, my partner is a stay home mum
-no arrears on any priority debts such at mortgage
-there is 84k left in the mortgage, sale price approx 90-100k tops, its currently a repayment mortgage approx 25 years left
-there is some work, although we dont yet know the fill extent. House is in a good location for job & schools. No plans to have further children.
– both cars are worth less than 1k each second hand, i use mine for work as i work in the next town and my partner uses the other for general day to day use and school runs
After further consulting citizens advise i think the bankruptcy/iva option is our only choice.
Sara (Debt Camel) says
Have you looked at the option of your partner going bankrupt and you having a debt management plan? If your partner could go back to work in a couple of year, even part-time, that could then give some money to repay your debts or possibly to make full & final offers?
Equity release is not the only problem with an IVA. More than a quarter of them fail and it doesn’t look as though would be able to afford large payments to it each month, which gives little “wiggle room” if one of your cars develops problems or the boiler dies. But perhaps you feel confident your parents could help you through IVA rough patches?
Another thought about your parents – is there any chance they could buy back your equity from the official Receiver if you both go bankrupt?
There aren’t any guarantees with IVAs, but I would be very surprised if StepChange wanted you to accept an unpleasant secured loan.
I do understand the attraction of security for a family with children.
Sam says
I am reading all your answers and tbh I was so close to about make decision between BR/IVA.
Now after reading all this I am firmly convinced and making/lock my final choice as I’m going to declare myself bankrupt in this week.
The only thing I am confused about my job, as I am doing contractual assignment which sometimes last 3,6 months and also not fixed by salary figure means it varies a lot my current one is about to finished in two weeks in that case what should I do..?
I shall be very thankful to you if you could shed some light of your expert option on this.
Sam
Sara (Debt Camel) says
if there can be big gaps between your work that is very difficult for an IVA. If you keep taking breaks in IVA payments than the IVA can extend a long time,
If your income in work varies a lot, that is more manageable with a good IVA firm but it still may be simpler to start the IVA when you are at a lowish income and not at a higher one.
Bankruptcy your income is what it is, if you are paying an IPA and your income falls the IPS reduces, if it goes up your IPA goes up. If you wouldn’t be paying an IPA at all when your income is lowish, then if you can arrange to have lower paid periods for your first year before you are discharged then an IPA may never be set and after the year you can earn as much as you want.
Sometimes it may be better to look at a debt management plan if you earn a LOT when in work as you can then offer full and final settlements when you have had a good 6 months and saved up money.
I think you need to talk to a good debt adviser. Not an IVA firm with an interest in you deciding to go for an IVA. Phone National Debtline on 0808 808 4000.
Ian says
We were told about a DMP originally over the phone but it would take quite a long time to clear. Due to health reasons, i dont think my partner will be able to work for some time yet, possible in the future.
We have been offered help if any unexpected instances occur however we haven been provided with a final financial statement from citizens advice, if we follow that and can agree those figures within the IVA , it should be manageable (payments & cover if needed).
I dont think any immediate family could buy out us if bankruptcy was to happen, which is now the only reason ive elected for the IVA route (& my partner bankruptcy). I was more worried at the IVA ending with a large expensive remortgage or loan.
Sara (Debt Camel) says
You should be ok if you go through StepChange re an expensive secured loan. Especially as there is not that much equity in your house anyway and if your partner is unable to work for health reasons you would be likely to fail any affordability test.
Glenn Fisher says
Hi,
IVA or Banktruptcy?
Credit debit of approx 23000 on cards and a loan. Some mine some my partners and loan joint.
I have a previous debt from a repossed home over 10 years ago that Im in discussion with Halfax about of potentially 22000. Was joint mortgage on a repossessed home with someone else who hasnt paid diddly. I did have an agreement that was capped which Halifax ended themselves and never contacted me for despite me chasing so could potentially only be 6900 owing??
We have a mortgage of 135000 on a house worth 196000 and a help to buy of 40000( we start paying this back in 2022) (so 20k equity?)
Our car is ours and is worth 8k but we 100% need a car.
Done a check on stepchange and it says after calculation it suggests an IVA paying 100 per month.
This is do-able as I was careful what I put in expenses to cover breakdowns etc.
Would you agree an IVA is best option? We dont want to sell up or move etc so Bankruptcy surely isnt an option.
What do you think generally or do you need more information?
Cheers Glenn
Sara (Debt Camel) says
One big problem with an IVA for you is that your mortgage costs are going to go up. With an IVA on your credit record you will not be able to remortgage in 2022 and will have to start the government repayments. So that will be c£700 in 2022 and then the extra will rise at RPI + 1% a year after that. That means that your IVA may well become unaffordable.
I do not think you should start an IVA knowing this unless it is written into your IVA that your payments will reduce by your extra mortgage costs in 2022. Don’t accept “we will look at it sympathetically at the time”.
I also do not think you start an IVA unless the old mortgage repossession debt is included in it. Don’t cross your fingers and hope it goes away. £100 a month is a low payment to 23k of debt – it may not be accepted for c 30k of debt.
If your / your partner’s income likely to improve over the next few years?
Have you already defaulted on the debts?
Have you looked at whether there is any PPI you can reclaim? You should do this before starting an IVA.
Glenn Fisher says
Hi,
We havent defaulted on anything at all yet but are living on borrowed time as are having to use the cards more to actually live. And no PPI no.
We will include the old repossession and I agree that 100 per month is a tiny payment compared to what we owe but I cant see any other way out unless we remortgage now and pay some debts off first perhaps.
I cant see that either of us will earn more in the near future but we will be getting Childcare costs as my son will be 3 in April so will get free hours and then obvs he will go to school in a couple of years….so in time that would be almost 600 a month that we’ll get back.
Sara (Debt Camel) says
I would be very surprised if you can get a large consolidation loan. You have to stop borrowing more money – every month your situation is getting worse. talk to StepChange about an IVA or a DMP. As I said do not agree to an IVA unless there is a clear plan in writing for the effect on the IVA of your mortgage costs rising from 2022.
Glenn Fisher says
Hi, we have an appointment with Step Change next week to discuss an IVA. I only thought about a re-mortgage as presently we could maybe remortgage to free up funds and get us into new fixed term to try and keep payments steady. The funds could cover off some debt spread equally among the creditors and then look at an IVA then for a smaller amount of debt. You worried me by saying that they probably wouldnt accept 100 per month but that is all we have really left over so I was thinking of other ideas.
Vlad says
Hello.i have a question.next month i have to.go back in romania because of family problems.i still have here debts.around 10k.ongoing like car finance, broadband, phone contracts, loan.what can i do ? thank you.
Sara (Debt Camel) says
A lot depends on how likely you are to come back to Britain. I suggest you talk to National debtline on 0808 808 4000 about your options.
Jan Smits says
Hi,
A few years back I took out a bank loan for £20,000 and maxed out two credit cards at £5000 each.
I made the payments for a year or so, but then defaulted. I contacted the bank (loan and one credit card) and the credit card company (the other card) and they gave me a year’s grace. I was still unable to pay after the year was up and they sold the debt on.
Now, after two more years, I am on my second debt recovery company (on behalf of the bank), who are now threatening to take me to court.
I haven’t heard anything from the credit card company for nearly two years.
I have no assets and no savings to speak of; my entire life fits in the small sailing boat I live on. In essence, other than the low-value, 40-year-old boat, I own virtually nothing.
With a simple bill of sale the boat could be sold to a trusted friend for a pound and with a letter of permission I could still sail and live aboard it.
I’m inclined to ignore all and every letter that comes through my (mother’s) front door and trust to my low profile to keep me from unpleasant encounters with bailiffs.
And as the boat is my home, I believe, correct me if I’m wrong, they can’t seize it anyway because that would make me homeless.
I couldn’t care less about my credit rating and have no intention of seeking loans/credit in the future.
Should I follow my inclination or would anyone suggest a different course of action (or inaction…)?
Thanks in advance,
Jan Smits
Sara (Debt Camel) says
how much is the boat worth? are you in work at the moment?
Billy says
Hi,
I have been advised to go bankrupt me and my wife. I have filled in the online forms and a family member is going to pay one of the bankruptcy fees but can i use an overdraft to pay the other bankruptcy fee or will this cause me to get into more problems for fraud reasons. I have read different views and opinions and i am just trying to get a clear answer.
Sara (Debt Camel) says
Are you paying any money to your debts at the moment?
Are you due to pay any council tax or utility bills in the next months?
Do both you and your wife owe over £20,000 each?
Chloe says
Hi, Myself and my husband have been in an IVA since May 2017. However, due to a new baby and maternity pay, we took 5 months break which was added onto a 6 year IVA. We have 2 children and both work . we earn roughly £2900 per month, but with childcare, running 2 cars due to work and everything else that comes with it, our IVA payments are £60 per month. My husband suffers with depression and anxiety and I feel i’m failing as a mum because i’m penny watching to let my child have a costume for world book day. Its getting too much. Would bankruptcy be beneficial for us?? It is on my mind all day, every day! its consuming me!
Sara (Debt Camel) says
That sounds very difficult. Are you buying or renting? How much are your cars worth?
JJ says
Hi I am in £28000 of unsecured debt and also have a holiday timeshare that will accumulate each year a management fee off £1180 subject to increase this is until 2028. I am currently not working as I am a stay at home mother of 4 and my husband has been written off work with anxiety and depression. We are now just receiving benefit based income. Also in housing association rented accommodation. The timeshare is in both our names. I have been in touch with payplan who have carried out an income and expenditure form for me and said I could pay back as little as £52 a month for an IVA, which I believe to be affordable at this time. However I have no assets car is worth under a £1000. I have tried to save up for bankruptcy but as I keep having to dip into it I just want a quicker solution that is managed for me. Feel that bankruptcy is very daunting. If i was to keep up with the iva payments would it fail. Reading comments and articles on your site has now put me off of the IVA. I just am so on the fence Iva or bankruptcy? Please advise many thanks
Sara (Debt Camel) says
Are you currently making any payments to your debts?
Does your husband also have debts?
JJ says
Hi thanks for reply. I am currently just have token payment arrangements with my creditors, but the timeshare I have is left unpaid and will accumulate every year. My husband just has the timeshare. Payplan have advised my husband to get a DRO for the timeshare and they gave me 2 options bankruptcy or IVA. As I feel the IVA payments are reasonable could you please advise me what could fail or go wrong?
would I be made to pay IPA if I went bankrupt even if income is benefit based. Would I have to pay the £52 disposable income I have? Would the OR strip me down from doing anything for example decrease my £150 food shop for a family of 6 down and control anything that comes in and out. I feel like bankruptcy is very invasive in comparison to the IVA.
Also my husband is suffering from mental health is there anyway he can get the timeshare debt written off once I go bankrupt or enter the IVA.
I have payplan ringing on Monday to get ny IVA set up and still very unsure after reading articles on this website. Feel maybe I should hold off and would only take me another 4 months or so for bankruptcy fee?
Sara (Debt Camel) says
To answer your questions in turn – although the mort important one is at the end!
“As I feel the IVA payments are reasonable could you please advise me what could fail or go wrong?”
5 years is a long time. Think back to 5 years ago – I bet that feels like half a lifetime…. The £52 a month may feel affordable at the moment but if something changes, there is no room to reduce that payments and your IVA may well fail. If you were paying £300 a month, then that could have been reduced to £200 or even £100 – a lot of wriggle room. But at £52 a month almost all of that is going to Payplan fees, your creditors get very little.
What can change in 5 years. …
A lot of things to do with benefits could. Suppose the government decides to freeze benefits for 5 years to pay for all the current furlough costs but your food bills and utility bills will still carry on rising. Suppose the government decides to backdate the “2 child rule” so you no longer get any help for your third and fourth child. You are probably getting help with your council tax? That amount is set by your local council, it may decide to decrease that so you have to pay more every month.
And your family will change. I don’t know how old your children are, but if they are young, they will get older and start to need more school uniform, want to go on school trips, need mobiles and pocket money. If they are already in their teens, some of them will get to over 18 and you will lose any benefit help for them. You could split up with your husband. Or have another child.
Will your car last another 5 years? How much is in the budget for servicing and MOT?
You can’t assume that what is affordable now will remain that way for 5 years.
“would I be made to pay IPA if I went bankrupt even if income is benefit based?”
No. 5 out of 6 people pay nothing in bankruptcy. If your only income is benefits the OR isn’t even going to think about your case.
“Would I have to pay the £52 disposable income I have? “
No. If your only income is benefits you will not have to pay anything.
And I don’t think you do have £52 a month disposable income. I suspect you don’t have enough in your budget for food, toiletries. clothes. school uniforms, hobbies, presents, haircuts etc. £150 a week food shop is pretty low for a family of 6!
“I feel like bankruptcy is very invasive in comparison to the IVA.”
It isn’t. Unless there is something important you haven’t mentioned, it sounds to me to be likely that you would receive 1 phone from the OR’s office in the first few weeks of your bankruptcy and that will be the last you hear from them. No-one visits your house and checks your possessions. You don’t have to report what you spend money on each month.
IVAs can be pretty invasive too – many people dread their annual IVA reviews.
“my husband is suffering from mental health is there anyway he can get the timeshare debt written off once I go bankrupt or enter the IVA?”
Well he can ask… but my guess is that this is very unlikely to be agreed. Payplan’s suggest of a DRO sounds like good advice.
“Feel maybe I should hold off and would only take me another 4 months or so for bankruptcy fee?”
If it will only take you 4 month to save the bankru[ptcy fees isn’t this an easy choice? Nothing you have said suggests that an IVA is a good idea for you. It will last much longer than bankruptcy, your will pay much more and it can fail.
I do understand this is a big decision. You must NOT feel pressured into deciding on Monday if you are not ready. Just tell Payplan you need an extra week to think about it.
Can I suggest you talk to National Debtline on Monday on 0808 808 4000? Go through the options with them. Have the budget that was worked out with Payplan in front of you and before you call ND, spend some time thinking which bits are likely to increase over the next 5 years.
You can open an account with the Insolvency Service to start saving up the bankruptcy fees so you aren’t tempted to dip into them. See https://debtcamel.co.uk/pay-bankruptcy-fees/ for details about paying in instalments.
JJ says
Hi Sara thank you so much for your advise, I really appreciate it. You have really cleared some things up and put my mind at ease and feel less dubious about going bankrupt. Think its just the stigma of it all. I think I have made my decision now and bankruptcy is the way forward. Just one more question 😊 if I have ordered very small amounts of stuff on a catalogue in the last 3 months should I wait a bit before I go bankrupt, will this be seen as fraudulent. For example amount a month ago hoover packed in and I order a new one on freemans catalogue worth £100?
Sara (Debt Camel) says
It sounds like it will take quite a few months to save up the fees to go bankrupt, make sure you don’t use any more credit in this time. You need to be treating all your creditors equally from now on. If the others are being paid a £1 token payment, you need to do this for the catalogue too.
But I don’t think £100 5 months before would be a problem.
JJ says
I am so sorry one more question 😊 so if I was to go bankrupt earlier say family lent me the money do you think this is a bad idea considering I have purchased items on credit very small valued items on a catalogue. Should I wait at least 3 more months or could I go bankrupt as soon as possible say even as early as next month? I have been paying the minimum payment for these catalogues but now I have informed them of my situation and will offer token payment until I can go bankrupt. Again many thanks for your honest and helpful advise
Sara (Debt Camel) says
There are no hard and fast rules about this. Read https://debtcamel.co.uk/bankrupt-after-borrowing/ where I talk about this.
Emma W says
Hi, myself and my husband currently have debts of approximately 22k. We rent own an old car (2003) and have one on HP. Currently we pay £800 a month on credit card debts. Every month it is a struggle and I feel like its getting harder each month. DMP offered was £356 for 6.5yrs IVA similar £350 for 5yrs. Do you think a DRO or bankruptcy may be better for us? Neither of our jobs would be affected as far as I know. Thanks Em
Sara (Debt Camel) says
I assume you are renting, no mortgage? provate renting or social housing?
The car on HP, how much is it worth? when does the HP end? do you need two cars?
How much do you owe and how much does your husband ower and how much (if any) is a joint debt?
When you say “DMP offered was £356 for 6.5yrs IVA similar £350 for 5yrs” i assume you mean you pay £356 or £350 a month for the relevant period?
Sarah says
Hi. I have been in an Iva for 8 months and I’m struggling. I rent from housing association and have no assets. My car is worth under £100. My Iva is £138 a month and weirdly keeps rising sharply. I did have an amigo loan and my mum was the guarantor. She paid this off after a windfall. I was great full but then told by Iva company that I wouldn’t be allowed to go bankrupt as the Luna was paid above all else (actually my mum is I’ll and didn’t want the stress for her or I). I am on my own earning £21,000 per annum. But I am struggling. Especially as my car needed a new clutch. New brakes and about another few hundred works. I want to go bankrupt. Can you advise please. I would be grateful for any response.
Sara (Debt Camel) says
Sorry quite a few questions which may sound rather random, but trust me, there is a reason why I am asking each of them as there may be some good options for you and for your mum.
I wouldn’t be allowed to go bankrupt as the Luna was paid above all else
can you say some more about this? Is this a Luma credit card?
Before your mum had the windfall, could she have afforded to make the monthly Amigo repayments?
Was this your first loan from Amigo? Do you think Amigo would have given it to you if they had seen your bank statements?
Did the IVA firm discuss bankruptcy with you at the start?
Has your financial position got better or worse over the last 8 months, ignoring the IVA payments?
Sarah says
My wage has gone up slightly but I was ill for two months of this with stress and anxiety. I have a son with mental health problems and he only moved out in August this year. The stress of that and Covid plunged me deeper into a low mood. They did discuss bankruptcy but I was under stress with my mum and the debt. In hindsight I should have gone for it then my mum could have paid after I went bankrupt. Before the windfall no they wouldn’t have been able to take it on. Plus my mum went ballistic at me going bankrupt as she thought it would negatively affect her credit rating. My mum paid the loan before I went into an Iva.
Sara (Debt Camel) says
what is the reference to Luna?
Sarah says
I think it’s auto correct on my phone. It should have said amigo.
About £2000 of my debt of £16000 is to HMRC.
Sara (Debt Camel) says
Three points:
1) Your mum probably has a good claim against Amigo for unaffordable lending. She has two reasons to complain. First that the loan was unaffordable for you, the borrower. And second that it was also unaffordable for her, the guarantor. See https://debtcamel.co.uk/amigo-complaints-by-guarantor/ which describes how a guarantor can complain with a template letter. If she wins, she will get a refund of all the money she paid.
(You could also make a complaint but there is no point – your mum paid off most of the debt, not you, and any money you are awarded would go to your IVA or bankruptcy and wouldnt benefit you at all. But instead you can help her get evidence that will support her complaint by emailing Amigo at hello@amigo.me with Subject Access request as the title and say you would like a copy of all the personal information Amigo has about you.)
2) you may “have given preference” to the Amigo loan before you entered the IVA by paying them and not paying other creditors. This does NOT mean a bankruptcy application would be refused – that won’t happen.
It may mean that you are given a bankruptcy restriction order, see https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/bankruptcy-2/bankruptcy-restrictions-orders/, but really if you read that you will see that a BRO makes very little difference to most people! It doesn’t mean you have to make more payments or for longer.
3) I think it would be a good idea for you to talk to a debt adviser about whether it is a good idea to end your IVA and switch to bankruptcy. A good adviser, not your IVA firm that either doesn’t know what they are talking about or are trying to mislead you. I suggest National Debtline on 0808 808 4000 (or if you are self employed, their other arm, Business Debtline 0800 197 6026).
Sarah says
Thank you so much. I will definitely seek advice from another adviser. Also thank you about looking at the complaint. I willl speak to my mum and ask her to look into it. Ty so much. I’m pleased I asked.
James says
Hi
I made an application for Bankruptcy on Thursday (22/10/20) but since have had a fairly substantial logbook loan written off. I now feel I have enough to propose a lump sum IVA to my creditors to avoid Bankruptcy by selling my car(considering the car will be taken off me anyway should I be made bankrupt).
Is there anyway of getting the Bankruptcy application revoked/cancelled and (if possible) some of the fee returned? No decision has been made as of yet as If It was made I wouldn’t want to go through the stress of trying to get it annulled.
Thank you!
Sara (Debt Camel) says
Why was the logbook loan “written off”?
Would you like to give some numbers, what is the car worth, how large was the loan, how large are your other debts in total, do you own any other assets?
James says
Hi Sara,
Thanks for getting back to me :)
I had some advice from National Debtline and they advised me to raise a complaint with the logbook loan company.
The car is worth about £6.5k, the outstanding loan balance was £2k. My debt total c. £25k
Sara (Debt Camel) says
but why exactly was the loan “written off” – the lender may have agreed to not ask for further payment but the loan still legally exists?
Did National Debtline recommend bankruptcy? Are you expecting to have to make any monthly payments in bankruptcy?
James says
Hi Sara,
The loan was was written off due to an affordability complaint being made as the loan wasn’t affordable when I took it out. The lender has confirmed in writing that it is written off, it’s been removed from my credit file and finance has been removed from HPI records.
National Debtline didn’t recommend any debt solution as I was contacting them regarding bailiffs and the logbook loan.
Thanks
Sara (Debt Camel) says
It is a shame you dond’t discuss this With National Debtline at the time.
So far as I know it isn’t possible to cancel a bankruptcy application. Indeed it may have gone through on Friday, they can be very quick.
I’m not sure trying to do this is sensible anyway. The IVA firms fees would be a few thousand. Some creditors will routinely vote against an IVA. It would be a couple of months of uncertainty. And what would you actually gain? There is little difference between a bankruptcy where you don’t make any monthly payments and a lump sum IVA. A lump sum IVA will still wreck your credit record for 6 years.
James says
Thanks for your advice Sara.
I’ve decided to declare bankruptcy. At least I should be able to prove that I need my car and should be given some funds to purchase a new one.
Best wishes
Theo says
Hi Sara, thanks a lot for putting great effort into such a helpful website.
I’ve incurred debt via personal guarantees through a limited business that is in the process of insolvency. The debts are on a joint and several basis with my former business partner. The total debt is around £180k between us. I don’t have any assets or savings, so I feel based on your advice, bankruptcy would be the best option.
My business partner however has a house and will be going down the IVA route. How would this work with the split of the debts?
Secondly, I’m looking to move country later this year (within the EU), what sort of effects would this have?
Thanks in advance!
Sara (Debt Camel) says
I suggest you and your partner should both talk to Business Debtline about your situation and options: https://www.businessdebtline.org/
I am not saying bankruptcy for you and an IVA for him is not right, just that you both need help to look at your situation, how it might change and the pros and cons. Even though the debts are enormous it is still worth your time to talk this through.
And BD can also answer your other other questions about hopw what one of you does affects the other and what if you move abroad.
Theo says
Hi Sara, thank you. I will give them a call tomorrow.
Leanne says
We have completed 3 years of our IVA, we rent but we owed more than £50k between us. We are starting to struggle with the £460 we are committed to paying and the only option we are ever offered is to reduce our monthly payments and extend the IVA. I think the company have been very clever to only ever offer more than 15% reduction so that they have to ask permission from the creditors. I’ve never been happy with the service received from them. We muddle along but I’m wondering if it’s worth looking at other options with less than 2 years left on this or just try and make this work. As we don’t own any property (not even a car) I feel we should have had other options put forward to us. We have paid very little of what we actually owe and most of our payments have gone to the IVA company for their fees… our statements show very little going out to the creditors, with one never having received a penny and still hassling us about our debts.
Sara (Debt Camel) says
I suggest you read https://debtcamel.co.uk/help-ivas-cost-of-living/ which looks at the extra flexibility that has been introduced last summer.
A lot depends on whether it is realistic to be able to “muddle along” with more prices coming in 2023. Will your rent increase, your council tax, broadband, mobiles etc
If you don’t feel your IVA firm is being helpful, talk to a propoer debt adviser about this – I suggest you phone National Debtline on 0808 808 4000.
Gemma says
Hi Sara
My partner had a business with a load of personal gurantees that went insolvent last year . £700k with and was looking at an IVA of £1500 a month due to us having the house . However I feel this is unaffordable . He has already been served with a bankruptcy petition for 25th April. Consequently do you need to attend the hearing ?
Anyway I started the business up again last year and it’s not going so well due to the weather economy so unfortunately I may be having to look at an insolvency process. I would guess there will be pg’s of around £300k so I would suspect bankruptcy would be my only solution . I also own a buy to let which i assume will also be frozen as assets and I’ll lose
Sara (Debt Camel) says
I think you both need to talk to Business Debtline urgently tomorrow, call 0800 197 6026 https://www.businessdebtline.org/
Do not agree to an IVA you feel may be unaffordable.
If the personal guarantees only came from him, then your equity in the house would remain your property if he goes bankrupt.
Gemma says
Hi Sara
Things have changed and now my business has gone into liquidation . Pg’s totalling £350k. My current house has a second charge on. I’ve already informed the lender I can’t pay the mortgage and I am in arrears. I do have a buyer so hoping that will go through otherwise I will have to do a voluntary possession
I also own a buy to let property with £130k equity. If it wasn’t for that I would declare bankruptcy . I’m currently in breathing space and I have two stat demands so need a plan in place. Not sure an IVA will be doable
Sara (Debt Camel) says
what happened to your husband?
how much equity is there in your house after paying the mortgage and the second charge?
Con says
I had debts of about £30,000 unsecured loans and credit cards. I have no assets but an income which resulted in me paying £250 a month to an IVA which I did without fail for 2 years. Due to cost of living and unexpected dental work I have missed the last 5 months and if do not pay the arrears in one go or agree payment plan by next month September my IVA could fail. Do you advise me to let it fail or contact the Supervisor to arrange bankruptcy myself instead of the IVA or what can you advise? Many thanks.
Sara (Debt Camel) says
How much realistically could you pay a month? Not a stretch amount, one you are pretty sure you can pay for years.
Do you have a car worth over 2k? Are you renting or buying?
Inflation may be falling, but that just means prices are going up more slowly. Energy bills have dropped, but unless you use more than average you will probably be worse off this winter as the £400 off electric bills over Oct-Mar isn’t going to be repeated?
KIRITHARAN SEENITHAMBY says
Hi sara,
I am a disable person. I have a credit card debt of £47000. I am working as a driver. I have my own car for a minicab job. if I go bankrupt may I keep my car worth £7000?
Sara (Debt Camel) says
I think you should talk to Business Debtline about your debt options and bankruptcy. They are experts at debt advice for the self employed and cover personal as well as business debts. https://businessdebtline.org/