If you are insolvent you may be deciding whether an IVA or Bankruptcy is the right options for you. One Advice believe that Bankruptcy should only ever be considered as a last resort after all other debt solutions have been exhausted.
IVA legislation is legally binding with your creditors so they are unable to take further actions, and was introduced by the Government so people could avoid declaring themselves bankrupt.
What is it? An IVA is a legally binding agreement between the debtor and their creditors. The debtor will make monthly payments for a set period. All interest and charges on their debts will be frozen and any unaffordable debt will be written off as part of the IVA agreement.
What happens with my creditors? Once your IVA has been accepted creditors cannot take any further action against you. Although failing to keep up on your IVA repayments means that creditors can start bankruptcy proceedings.
How long does it last? The average length of an IVA is 60 months.
Can I keep control of my assets? Yes and this is the biggest advantage of an IVA if you have assets such as a house, although you may be asked to release some equity.
Are my details kept private? Yes, the details about your IVA will not be advertised in your local press. Only those whom you are financially connected with need to be notified.
Can I keep my business? Yes, you can still run your business and be involved in financial roles.
What is it? Bankruptcy means that you have been legally declare insolvent, meaning that you are unable to repay your debts. Creditors can apply for a Bankruptcy Order against you for as little as £750. When it has been accepted, a debtor loses control of all their assets, which can be sold to creditors.
What happens with my creditors? Your creditors may look to sell your assets so that they can be repaid in part.
How long does it last? You can be discharged from bankruptcy after a year. Your Bankruptcy Trustee may apply for an Income Payments Order which means you will be making payments for much longer. The Order will stay on your credit file for six years.
Can I keep control of my assets? No, your assets will be dealt with by your Trustee in Bankruptcy. All of your assets can be sold and you will only be allowed those assets needed for a basic standard of living.
Are my details kept private? No, the Bankruptcy Order will be published in your local paper and details are also available online.
Can I keep my business? No, any business will be closed if you are declared bankrupt.
If your debts are at a level where Bankruptcy seems like a tempting option, an IVA could be a possible alternative. For more information and advice please contact the One Advice team on 0800 048 1752.