subject: IVA vs. Bankruptcy [print this page] IVA vs. BankruptcyIVA vs. Bankruptcy
You don't know quite how you've got here, but yet here you are. Somehow, you've managed to accrue some personal debt and you're not sure exactly how to go about dealing with it. This problem is more common than you might think, and you certainly aren't alone in facing such a situation. Two of the most prominent options when faced with these circumstances are to declare ones self bankrupt, or to take up an Individual Voluntary Arrangement (IVA).
Bankruptcy
Bankruptcy is such a scary term, but the reality can actually be quite different. Bankruptcy is an instant procedure you have to file a petition at your local county court for bankruptcy, after which your file is placed in the hands of an Official Receiver or an Individual Trustee in bankruptcy - in other words a licensed insolvency practitioner. The trustee will take control of all of your assets and so this is often the best option for people that don't have many! They will also freeze your bank accounts and it is essentially the debtor's responsibility to secure as much from your personal estate to benefit the creditors.
Perhaps the main advantage of bankruptcy is the length of the arrangement. Bankruptcy will typically last only a year, whereas IVAs can last several years. Bankruptcy will also ensure that 100% of the debt is lifted, whereas an IVA normally results in only 75% of the debt being written off.
Your bankruptcy will however be featured in your local paper, in order that anyone that you owe money to, are able to see that you have been declared bankrupt.
Individual Voluntary Arrangement (IVA)
IVAs by their very nature are individual and the terms may vary. Normally they run for 60months (5 years) at the end of which all of your unsecured debts are written off. Sometimes they are shorter than this, and the structure of the payments can vary too. The norm is for a single monthly payment to the supervisor of the IVA, who then distributes this equally between creditors.
Individual Voluntary Arrangements do not have the same negative connotations that bankruptcy does, and unlike bankruptcy you will not appear in the local press. You will also maintain full control over your own assets and your credit rating will not suffer to the same extent.
The normal procedure is for an arrangement whereby the interest on debt is frozen and up to 75% of the debt is written off. This is dependant upon your being able to prove that you have a steady income.
