Deciding what to choose: Bankruptcy or IVA?
We are bombarded with information regarding bankruptcy and IVA(Individual Voluntary Arrangement). No wonder, it is difficult to know which one will work for us.
Deciding which option to take will depend solely upon your own individual circumstances. Therefore, it is always advisable to seek professional debt advice before making a final decision.
Why choose bankruptcy?
It is one of the swiftest debt solutions available as the whole process only lasts for one year, thus freeing people of their debt and allowing them to start again.
However, bankruptcy can be disruptive to many careers including accountancy, the police and the armed forces. It will also be impossible to become or maintain a job as a company director or to hold public office. A bankruptcy also demands the distribution of all assets to creditors, including the family home. Gaining credit after bankruptcy can be quite difficult and a mortgage may be impossible to obtain.
Why choose an IVA?
An IVA will not affect your career and is a popular option as it allows an individual to pay off a large percentage of the debt over a five year period. An IVA comes with the added advantage of allowing an individual to hold onto their assets and keep their bank account. This gives them a better chance of being able to obtain credit when their IVA has been settled.
However, one drawback is that 75% of creditors have to agree to an IVA. Some people are also deterred from an IVA as it is a lengthy five year process and does incur a practitioner’s fee which can fluctuate around £4000. However many practitioners do not charge upfront fees and prefer to deduct their costs from a clients individuals monthly payments. In comparison, an IVA does work out much cheaper than bankruptcy.
Hopefully some of the debt advice above will make understanding the differences between the two a bit easier. Both an Individual Voluntary Arrangement and Bankruptcy will take away the stress of having to deal with creditors and help you to resolve your debt.
