If you are considering bankruptcy action or an Individual Voluntary Arrangement, your personal finances must be in some difficulty. There is a lot to think about and consider when comparing the advantages and disadvantages of each type of solution. Both possible solutions have implications for your future financial status in the long term, and potentially your employment. The two main differences involve the distribution of your assets and how long it will take you before the solution is 'discharged' or comes to its conclusion.

An IVA is often a great way to reduce the amount of debt that you have. Up to seventy five percent can be written off and the creditors can't add any more interest or nasty charges. In exchange, you must make one monthly repayment, which is distributed between your creditors. Within three to five years (depending upon the term stated in your agreement) you will be entirely free of debt.

With an IVA, you won’t have to sell off any of your major assets, although if you have significant equity in your home, you may be asked to release it. With an IVA, you and your advisor agree how settlement is made, whereas with bankruptcy, the court will handle all distribution of your assets. There’s also no real social stigma attached to an IVA. It won’t affect your career, there are some exceptions, but you will still be able to work in most fields, and you can still be a company director. In the future, you have a much better chance to get credit, whereas Bankruptcy will end your days of credit, possible for life, making a mortgage an impossibility. One major disadvantage of an IVA is the length. You will make repayments for up to five years, whereas with bankruptcy it is now ended within two years.

Bankruptcy has many of the issues mentioned above. Of course, due to the Enterprise Act, a bankruptcy is a much swifter affair than an IVA, the slate is wiped clean within two years, but since you lose all of your major assets, it is not to be taken lightly. For young people, with few assets, bankruptcy is often a better choice. Although the chance of ever getting a mortgage is greatly reduced. It is important to remember that a legal loophole was recently closed to prevent Student Loans being discharged with other debts in a bankruptcy. The social stigma and potential employment implications are a major concern with bankruptcy. You will not be allowed to be a company director and certain professions are barred to you.

<< Back