In the current harsh economic climate of ever rising costs and increasing redundancies, many are faced with making some tough financial decisions. Indeed, when matters come to a head many people are finding they have little option but to file for bankruptcy. However, there is another option, which is by no means painless, but may turn out to be a far better choice. This is the option of an IVA.
The Drawbacks of Bankruptcy
Things have improved in recent years for individuals who have opted for bankruptcy. For example, people who choose this option are now discharged after only a year. However, this route still has its drawbacks. For instance, even after the individual has been formally discharged, the decision to opt for bankruptcy will remain on their credit report for a term of at least five years. This means getting a mortgage or bank account will be nigh on impossible and even obtaining a mobile phone contract will not be easy.
In fact, a creditor can obtain a bankruptcy order even if they are owed little more than £750. The debtor will then have to declare themselves bankrupt through the county courts whereby the debtor’s assets will be declared and sold to cover the debt. Whilst many assets are exempt from repossession, including cars and pensions, there is always the possibility that the debtor may lose their house.
In addition, filing for bankruptcy has the disadvantage of being an entirely public affair. Many institutions, including the debtor’s bank, will have to be informed of the bankruptcy decision and the case will also be published in various newspapers. These are just some of the reasons why many people believe that an IVA is the far better option.
Why An IVA May Be Better
IVAs or Individual Voluntary Arrangements have been introduced fairly recently in order to offer an alternative to bankruptcy. However, IVAs tend to be restricted to debts that involve credit cards, personal loans or other types of ‘unsecured loans’. Whilst an IVA is legally binding, it offers the debtor the opportunity to settle the debt or debts within a certain period. Hopefully this period is one that the debtor feels is reasonable, although more often than not, the limit is set to a period of five years.
In addition, whilst the creditors can advance alterations to the proposal, the debtor has the right to choose either to accept the alterations or to refuse them. All debt and interest charges will also be frozen and no additional demands can be made by the creditor.
An IVA is also a much more private affair. Nothing will be published in the papers for example. The costs of IVAs can be large and may include having to pay a fee upfront, but the debtor will not have the stigma of a so-called “bankruptcy restrictions order” which will make future arrangements difficult and can be imposed for up to fifteen years.
However, it is vital to remember that you only have the option of an IVA if you have the means to pay the debts off and, if any repayments are missed, the debtor can still be forced to file for bankruptcy anyway.
If you’d like more information about IVAs, click here to visit the IVA Expert website.



