Is An IVA A Better Option Than Bankrtupcy?

If you have fallen into serious debt and are considering filing for bankruptcy there might be another option available for you if you happen to be a UK resident. People living in the UK can apply for an individual voluntary arrangement if they have a lot of debt and no means of paying it all off. An individual voluntary arrangement, or IVA, is for people who have a very serious debt problem, usually at least £15,000 owed to a few different creditors. Using this option is really the only alternative to bankruptcy in the UK and that is exactly what the arrangement was created for.

Individual Voluntary Arrangement vs Bankruptcy

When your debts have overtaken you and there appears to be no way you can possible repay them, you are almost certainly thinking about filing for bankruptcy. This is a very serious step which should not be taken lightly. Consider the following effects of filing for bankruptcy:

Bankruptcy can affect your pension rights.
Your bankruptcy must be made public through a notice in the press.
Bankruptcy will affect your ability to get credit for six years.
If money is inherited while you are under a bankruptcy order, you will be ordered to pay your debts back.
You may have to pay money each month if you earn a good salary.
You could lose you position of employment and be barred from taking up certain positions or offices.

The individual voluntary arrangement was introduced by the government to provide people with an alternative to the serious step of becoming bankrupt. It was originally designed for businesses, but is now extensively used by consumers. With this arrangement you will pay back a percentage of what is actually owed to your creditors and anything that you cannot repay is written off. Your monthly repayments will be based on your financial circumstances, so should be within your means to pay. The process usually lasts for five years. At the end of this time, any creditors who have debts that have not been fully repaid can no longer pursue you for that money.

Because this is a legal agreement, creditors will have to accept the IVA being set up if you get the agreement of 75% of them. That proportion relates to the total value of your debts, rather than the number of creditors. There are many benefits to an IVA that bankruptcy does not offer, such as:

You are far less likely to lose any of your property with an IVA.
You will not lose your employment or your business.
Individual voluntary arrangements are not advertised, so your situation can be kept private.
You have five years to pay back as much of your debts as you can afford.
You will usually only pay a portion of the total debt.
The creditors cannot take any further action against you once the agreement is set up.

How to Apply for an Individual Voluntary Arrangement

Since an IVA is a formal, binding agreement you will need to have an insolvency practitioner to help you with all the legalities. Using a debt management company to examine your situation is the best way to go. You should do your homework when looking for a good debt management company. Pick a few of the best companies and apply to them. Out of these, pick the one that fits best with your situation.

The debt management company will get their fees out of the monthly payments that you make. Most debt management companies will have insolvency practitioners working for them. The insolvency practitioner will handle all of the legal work involved, such as getting the Interim Order from the courts. An Interim Order will prevent creditors from taking any legal action against you.