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When times are tough and paying bills seems an impossible task, one of the solutions which frequently comes to mind is bankruptcy. If you can’t afford to pay your creditors, this option can be one of the best ways to resolve the situation.
Yet, bankruptcy isn’t right for everyone. While there are many alternatives available, an IVA (individual voluntary arrangement) can be a better – and less extreme – way to bring your debts under control.
Although there are several differences between these two options, IVAs and bankruptcy are both forms of insolvency. As a result, both will appear on your credit file – for six years – and your name will be entered onto the Individual Insolvency Register.
Furthermore, both solutions will result in debts ultimately being written off and stop communications between you and your creditors.
Although bankruptcy and IVA are similar in some ways, there are several key differences. For example:
Once bankruptcy has been declared, your home might need to be sold. With an IVA, this situation is less likely to occur.
If you don’t own your home, but rent, an IVA shouldn’t affect this. However, some landlords include a clause in tenancy agreements stating bankruptcy will result in eviction.
If payments need to be made, these usually last for up to three years in the case of bankruptcy and around six in the case of an IVA
Unless it is essential (for example, it’s needed for work) your vehicle will usually have to be sold in the event of bankruptcy. An IVA shouldn’t have any impact on this however.
Although both might have some effect on your employment. Bankruptcy typically has more serious consequences. For example, solicitors and estate agents typically bar those affected from membership.
In some situations, bankruptcy might be the best option for you. However, we would never recommend pursuing this solution without obtaining specialist debt advice first. It might be that an IVA can help you pay your creditors while allowing you to control your assets.
For more information, get in touch for a no-obligation chat with one of our specialist advisors today. They can be reached through the contact form or by calling 0161 956 2680.
Debt write off applies to unsecured debts and on completion of an IVA. A debt write off amount of between 20% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
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Free money help and advice can be found at the MoneyAdviceService.org.uk