For anyone with large debts and significant financial issues, bankruptcy is a daunting prospect, for those unaware; bankruptcy is the process of the removal of personal debts by court order, a process which is often initiated by the debtor in order to deal with the debts they are unable to pay.
Bankruptcy has a number of different types, the simplest of which is “Chapter 7” bankruptcy which is a basic liquidation for individuals and businesses, also commonly known as “straight bankruptcy”, this is the simplest form of bankruptcy available.
Many people wish to avoid bankruptcy due to the disadvantages associated with it, some of the disadvantages of bankruptcy include the following but are not limited to:
- The negative impact on credit ratings – going bankrupt has a very negative impact on the credit rating of the individual facing bankruptcy, this can affect their ability to gain credit for any purpose be it a credit card, loan, or mortgage.
- Advertisements in the news – People undergoing personal bankruptcy have a notice placed in the London Gazette, a daily news publication produced Monday through Friday by the stationery office, and many people wish to avoid having their financial situation included in a publication.
- Problems with Bank accounts – when people go bankrupt they commonly have issues with getting a new bank account once they are in the bankruptcy process, this is also linked to the negative impact on the credit rating as a result of bankruptcy.
Are there viable alternatives to Bankruptcy?
One alternative to bankruptcy is what is known as an IVA (Individual Voluntary Arrangement) which is a formal arrangement between debtors’ & creditors which enables the debtor to repay the amount they owe over a period of time to their debtors in manageable monthly repayments to suit them.
How Do I Qualify For An IVA?
To qualify for an IVA you generally need a debt level of around £12,500 & a minimum of 2 creditors. These are the basic, general requirements for an IVA however applicants’ may be subject to additional checks.
What Are The Advantages Of An IVA?
1/ You can avoid all the potential pitfalls & disadvantages of an IVA (mentioned above).
2/ You can pay off your debts over a period of time making monthly costs much more manageable and easy to cope with on a day-to-day, week-to-week & monthly timeframe.
3/ You can write off a significant proportion of your debts (up to 75%) with an IVA, enabling people suffering from serious debt issues to eliminate the majority of their debt over a period of time (as long as they keep up with their repayments).
How Do I Apply For An IVA?
There are a number of different companies that allow you to apply for an IVA, one in particular that is very popular in Britain is a company based in Lincolnshire called: “PayPlan” who offer free debt management services for individuals in debt and struggling.
An IVA application is a process of declaring your financial situation to an insolvency practitioner & from there a suitability assessment is made to ascertain whether or not an IVA would be an appropriate solution for you in your current financial situation.
For those looking for free financial advice, another option is the citizens advice bureau, link: https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/ these are a government backed organization offering free debt advice & advice on a range of different issues including legal issues, health issues, anything relating housing matter.