Should You Consider an IVA or Bankruptcy? Which Is the Best Option for You?
When an individual in the UK accumulates a lot of debt, they have a number of options available to them.
Either they can file for bankruptcy, or they can consider a number of bankruptcy alternatives, such as a debt consolidation scheme, e.
g.
an IVA (Individual Voluntary Arrangement).
As IVAs typically involve repaying debt and can last for up to five years, while bankruptcy wipes the slate clean and the bankruptcy period lasts for only a year, a number of people in debt wonder if it's easier, less hassle and therefore a better option simply to file for bankruptcy.
However, bankruptcy can have major repercussions that an IVA can avoid, so it is important to figure out what is best given your particular situation.
Firstly, it is important to get debt advice tailored to you and based on your situation.
Various debt advice organisations - such as the Consumer Credit Counselling Service (CCCS) - can help, although an IVA advisor should be able to recommend the best option for you, even if it is not an IVA in your case.
If a person declares themselves as bankrupt, they can lose all of their assets.
Although some assets - including cars and pensions - are exempt, the debtor may lose their house.
Those assets that are not exempt will be sold, with the money distributed amongst creditors.
Also, various institutions are notified, such as banks, and the person's name will be published in local newspapers.
Not only that, but their credit rating will be affected for six years, possibly longer.
On the bright side, all debt will be discharged completely after the one-year Bankruptcy Order period.
Therefore, if a person does not have any assets (such as a house) and owes a very large amount of debt, then bankruptcy may be a better option.
Alternatively, if a person applies for an IVA instead, they may have to re-mortgage their home but they should be able to keep it.
IVAs are a more private option, avoiding banks being notified and newspapers publishing details to the public.
In fact, whereas bankruptcy will affect the ability to conduct business in certain professions, such as accounting, an IVA will mean that people in these types of professions will be able to carry on with their work unaffected.
In this instance, then, an IVA may be a better option for a person who has assets that they do not want to lose, who earns a regular income and also does not want their career affected by the outcome.
It may last longer than bankruptcy, but the person can work with their creditors to repay as much debt as they can afford to, with the remainder written off at the end of the five-year period regardless.
Either they can file for bankruptcy, or they can consider a number of bankruptcy alternatives, such as a debt consolidation scheme, e.
g.
an IVA (Individual Voluntary Arrangement).
As IVAs typically involve repaying debt and can last for up to five years, while bankruptcy wipes the slate clean and the bankruptcy period lasts for only a year, a number of people in debt wonder if it's easier, less hassle and therefore a better option simply to file for bankruptcy.
However, bankruptcy can have major repercussions that an IVA can avoid, so it is important to figure out what is best given your particular situation.
Firstly, it is important to get debt advice tailored to you and based on your situation.
Various debt advice organisations - such as the Consumer Credit Counselling Service (CCCS) - can help, although an IVA advisor should be able to recommend the best option for you, even if it is not an IVA in your case.
If a person declares themselves as bankrupt, they can lose all of their assets.
Although some assets - including cars and pensions - are exempt, the debtor may lose their house.
Those assets that are not exempt will be sold, with the money distributed amongst creditors.
Also, various institutions are notified, such as banks, and the person's name will be published in local newspapers.
Not only that, but their credit rating will be affected for six years, possibly longer.
On the bright side, all debt will be discharged completely after the one-year Bankruptcy Order period.
Therefore, if a person does not have any assets (such as a house) and owes a very large amount of debt, then bankruptcy may be a better option.
Alternatively, if a person applies for an IVA instead, they may have to re-mortgage their home but they should be able to keep it.
IVAs are a more private option, avoiding banks being notified and newspapers publishing details to the public.
In fact, whereas bankruptcy will affect the ability to conduct business in certain professions, such as accounting, an IVA will mean that people in these types of professions will be able to carry on with their work unaffected.
In this instance, then, an IVA may be a better option for a person who has assets that they do not want to lose, who earns a regular income and also does not want their career affected by the outcome.
It may last longer than bankruptcy, but the person can work with their creditors to repay as much debt as they can afford to, with the remainder written off at the end of the five-year period regardless.
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