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Submitted by: Steve Morgan
Bankruptcy or IVAs (Individual Voluntary Arrangements)? It is a simple question, but what is the answer? This article examines each side and provides suggestions based on an individual’s situation, such as their job, their assets in addition to whether or not they wish for the whole debacle to be made public.
Various options are applicable to people whose debt has spiralled out of control. They might contemplate a debt consolidation scheme – e.g. an IVA (a.k.a. an Individual Voluntary Arrangement) – or they might just wish to go ahead and declare bankruptcy.
As IVAs often involve repaying debt and can last for 5 years, whereas bankruptcy will wipe the slate clean and the bankruptcy period lasts for only a year, a number of individuals who are in debt question whether it is simpler, less hassle and therefore a better option simply to declare bankruptcy. However, bankruptcy will have massive implications that an IVA can bypass, so it is important to ascertain what is best given your individual circumstances.
Firstly, it is essential to obtain debt help tailored to you and based on your situation. Numerous debt advice organisations – such as the Consumer Credit Counselling Service (CCCS) – will be able to help, although an IVA adviser should be able to find the best option for you, even if it isn’t an IVA in your instance.
Bankruptcy may only last for a year and can wipe the slate clean, but there are other factors to contemplate. Banks are notified of the filing, with the person’s credit rating being negatively affected for a minimum of 6 years. Local newspapers will divulge the specifics of the bankruptcy. Perhaps most importantly however, the majority of the person’s assets will be sold including their home, the yield of which will be split amongst those who are owed money to. With this in mind, a person with large amounts of debt but with no assets may want to contemplate bankruptcy instead of an IVA or other forms of debt settlement or debt consolidation.
Alternatively, if an individual gets an IVA instead, they may have to re-mortgage their house but they should be able to hold onto it. IVAs are a much more private option, avoiding banks getting informed and newspapers publishing your details to the wider public. In fact, while bankruptcy will affect the ability to continue in particular careers, such as accounting, an IVA will mean that individuals who operate in these kinds of employment will be able to carry on with their work unaffected. In this instance, then, an IVA might be a more preferred option for somebody who owns assets that they don’t want to lose, who earns a regular income and also doesn’t wish for their job being affected by the outcome. It may last for longer than bankruptcy, but the person has the option to work alongside their creditors to repay as much debt as they’re able to afford, with the remainder cleared at the end of the 5-year period anyway.
About the Author: The IVA Service is an IVA company based in Cardiff, with other offices in Belfast and Glasgow. Our specialists are able to provide debt information to those currently contemplating an IVA or bankruptcy.
iva-service.co.uk/
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