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The Bankruptcy Service Case Study Example: Bankruptcy v IVA - A 2nd Scenario

The following bankruptcy case study is a fictitious example, designed to help you understand working situations where bankruptcy is and isn't appropriate.

Another look at whether bankruptcy or an IVA is the best option.

I have substantial debts which I estimate to be around £25,000. I’ve been chipping away at my debts, which have been over £30,000 in the past. However, my health has recently taken a turn for the worse, and now I am not in a position to make payments to my various creditors. I have low rent but have a cheap car which I need due to my condition, which makes walking difficult. I am worried about my car, and also the fact that I had hoped to buy a house at some point in the future. My income is regular but not that high, as my condition has forced me to reduce hours. What do you think is the best option for me – IVA or bankruptcy?

First of all, I do not think that an IVA is the best option for you. Individual Voluntary Arrangements are designed primarily to protect assets such as properties and businesses, and could be a very expensive remedy for you. You income is also probably not sufficient for such a course of action. The fact that you have reduced your hours will help your cause in declaring bankruptcy, as it is unlikely you’d have to pay anything in an Income Payments Agreement (a binding agreement between you and your trustee that you will make contributions towards your bankruptcy debts and costs for a maximum period of 3 years). As for your vehicle, from the information I have, it seems highly unlikely that it would be taken off you. As for buying a property, you would be in a position to take out a mortgage with selected lenders three years after the date of your bankruptcy discharge.

For more details on Individual Voluntary Arrangements (IVAs), see our specific page on IVAs.

Free debt counselling and advice is also available from the Money Advice Service available at: doesn't charge a fee for its bankruptcy service, but receives remuneration from the partners that we work with in order to keep operating. Those partners must charge a fee to the customer to likewise cover operational costs, and this amount will vary depending on the solution offered, and the terms of the parner. For details of these terms, please refer to the website of the organisation dealing with your bankruptcy. Upon application with, we will forward your information on to one of our specialist debt partners. You will then be contacted, and you will be able to explain your case, and expert advice will be offered in order to ascertain the most appropriate debt solution.