The Tough Choice: IVA or bankruptcy?

The number of personal insolvencies is on the increase. Nearly 30,000 personal insolvency cases were reported in England and Wales alone in the first quarter of 2009.  In the same quarter, the number of declared bankruptcies has increased by half a percent, whilst the number of consumers that have signed up for an IVA, (Individual Voluntary Arrangement), has climbed by 3.6%.

Most people are unsure about the implications of entering into an IVA, or bankruptcy, and it is important that professional IVA advice is taken, before a decision is reached. Before signing up for an IVA, or becoming bankrupt, there are serious considerations, and questions that should be asked by any potential debtor.

For more information on an IVA, or for free debt advice, simply call The Debt People on 0161 927 8001 today.

The IVA was introduced to provide financially over-stretched consumers, with an alternative to bankruptcy.  An IVA can provide an important lifeline for someone that is in serious financial difficulty, and that would like to avoid bankruptcy. Certain unsecured debts can be included on the IVA, including personal loans and bank overdrafts, as well as store card and credit card debt.  The IVA is a legally binding agreement between creditor and debtor, and it is managed and supervised by a licensed Insolvency Practitioner.  The term of the agreement is fixed, which typically allows the individual to pay off all of their debts over 60 months.

The debtor will be required to make a monthly contribution into their IVA, based on how much money they have available once their priority expenses have been paid. This money is then distributed between the creditors, on a pro-rata basis, and covers any fees that the Insolvency Practitioner incurs. The monthly payment, and the practitioner’s fee, is agreed at the beginning of the arrangement.  When the IVA reaches the end of the term, any remaining debt will be written off. For consumers that don’t qualify for an IVA, maybe because their debt level is too low, a Debt Management Plan could offer an alternative.

A bankruptcy order can be obtained, by a creditor, for debts of £750 or more. Alternatively, a consumer can declare bankruptcy at their local county court by completing the necessary documentation.  The debtors assets are then disposed of and the proceeds of the sale are split between the creditors, minus any fees that the Insolvency Practitioner incurs.  Not all assets can be included in the bankruptcy, and exemptions include household contents and normal possessions, as well as a car, money in a pension fund and tools of trade.

Bankruptcy usually ends after 12 months, if not before, at which point the debtors slate is clean, and debt problems should be a thing of the past.  The biggest downside, with bankruptcy, is that the debtor may loose their assets, which could include their home.  With an IVA, the debtor may be required to raise funds by remortgaging, but the property should be safe.

For more information on an IVA, or for free debt advice, simply call The Debt People on 0161 927 8001 today.

If you’re are in serious financial difficulty, then an IVA may be the best way to get out of debt.  There are certain things that you need to consider before you decide which option to choose, and there are many differences between the debt solutions available.

An IVA is a confidential agreement between creditor and debtor. Details of the IVA will be listed on the Insolvency Service website; however details of the agreement will not be released into the public domain.  Your family and friends need not know, and no details will be given to your employer.  Information about the IVA will not be published in any newspapers.

Bankruptcy, on the other hand, is deemed a matter of public record, and to that end, a debtor is legally required to notify certain parties, such as their own bank.  Information on the bankruptcy will be included in newspapers, and it may not be possible to keep the information from employers, as well as family and friends, and any other people that are known to the debtor.

For individuals with serious debt problems, both of the afore mentioned choices should be considered, as well as other debt help options such as Debt Management Plans, Trust Deeds and consolidation loans.  The right debt solution depends on individual circumstances, and any decision reached should be considered carefully, as it could have long term effects.  It is important that IVA advice is sought from an Insolvency Practitioner, before any action is taken.

The important thing to remember; whatever you do, don’t leave it too late.

For more information on an IVA, and a number of other professional debt solutions, such as debt management, simply call The Debt People on 0161 927 8001 today.