Alternatives to Bankruptcy
Many people who contact us are considering bankruptcy or are worried about being made bankrupt against their wishes. It is important to make sure you understand what the implications of bankruptcy are and what other options are available to you. These options include the Individual Voluntary Arrangement (IVA), which was introduced by the government in 1986 to help people who would otherwise face bankruptcy. Below is a table highlighting the key differences between Bankruptcy and an IVA:
Bankruptcy |
IVA |
|
| Loss of assets | Any property such as a house or flat will usually be sold. This is also true of other significant assets, such as your car. | You will usually not need to sell your house and will often be able to retain other assets. |
| Level of control | Once a bankruptcy is initiated, the outcome is dependent on information gathered by the Official Receiver and on the decision made by the presiding magistrate on the day of the bankruptcy hearing. | IVA negotiations are handled by a licensed Insolvency Practitioner working on your behalf. The terms of the IVA are subject, within limits, to what makes sense to both you and your creditors. |
| Credit status | Your credit status will be non-existent – it will be impossible or very difficult to get a mortgage, or any other credit such as a card or a loan. | When you have successfully completed an IVA you will be able to start building a good credit rating again. Although an IVA is recorded, you will have demonstrated an ability to complete a five-year repayment program. |
| Stigma | Bankruptcy may be advertised in your local papers and people you know my find out about it. | An IVA is a private agreement with your creditors. Nobody else needs to know about an IVA. |
| Career | Certain employers will not accept someone who is or has been bankrupt and there are certain careers closed to you. There are also restrictions on owning a business or being a director | An IVA does not have an impact on what career you can pursue or what office you can hold. |
It is well worth remembering that the people you owe money to will often want to see an outcome other than bankruptcy. That is especially true if you can propose a way forward that returns more of the outstanding debt to them.
Bankruptcy does have some advantages – your debt problems are resolved and you will be in the process itself for three years generally. However, most people would agree that other options are probably better.
