Choosing an IVA over bankruptcy
Posted on 25. May, 2010 by admin in debt
If you’re in debt, what is better – go for an IVA (Individual Voluntary Arrangement) or just get yourself declared bankrupt, get your debts written off and that’s the end of it?
An Individual Voluntary Arrangement is an arrangement between you and your creditors that you will pay so much of the debt each month. An IVA can be set up if you owe at least £15,000 and can afford to pay at least £200 per month. How much you pay depends on your individual personal circumstances. An IVA normally lasts 5 years. This is suitable if you can guarantee regular money coming in. However if you do not keep up your regular payment, you could be declared bankrupt. So this is only suitable if you are in regular employment. The IVA need only be known to you and your creditors – your friends, family and employer need never know unless you decide to tell them.
With bankruptcy, all your debt is written off, but you will lose any assets you own, like your house or your car. These assets are shared between your creditors. You have to set up a basic bank account – you cannot run your current account or credit cards – you cannot have an overdraft or set up direct debits on your basic bank account. Imagine not having a cheque book nor being able to pay bills by direct debit.
Also you have to declare your bankruptcy in the local newspapers, so all your neighbours, friends, family, work colleagues will know. Even after your bankruptcy has been discharged, your credit rating will be affected for years to come. And you will find it difficult to get a mortgage or a loan. Certain jobs will also be closed – like solicitor, or chartered accountant, even if you are well qualified; even basic level finance jobs will be closed to you. You also cannot be a member of the local council, an MP or a Justice of the Peace.
So with bankruptcy there is so much to lose. An IVA is preferable as it doesn’t impact on your life quite so much. But it is only suitable for certain people – you must be able to afford at least £200 per month, so it’s only for those who have a regular income.