Bankruptcy is something that is entered in to when a person cannot pay his or her debts. It means all the debts are written off. Sounds good right? Well it’s not that simple and there are many consequences. Individual Voluntary Arrangements were introduced under the Insolvency Act in 1986. They are considered an alternative form of bankruptcy but the consequences may not be as detrimental. They do, however, come with their own issues.

One of the biggest consequences of bankruptcy is the loss of control it brings. If you declare yourself bankrupt you will lose control of all of your assets. You will also be unable to get any credit over £250.

Individual Voluntary Arrangements (or IVAs as they are known) are an alternative to bankruptcy. Unlike bankruptcy IVAs are not made public. The agreement is made privately between the person in debt and those that they owe. Also, a person who has entered into an IVA is able to keep their job if they head up a company. However if you do enter into an IVA then you will lose control of your finances in that you must follow a strict budget and you are unable to get credit.

Both bankruptcy and IVAs are serious financial commitments and neither should be entered into lightly. If you are in debt then you should contact a debt counselor. He or she will be able to tell you whether either an IVA or declaring yourself bankrupt are the right options for you but they should never be seen as the easy way out. However if they are the only options then they can be beneficial so should not be overlooked due to social stigma.

IVA’s (Individual Voluntary Arrangements), are an increasingly popular way for those with financial difficulties to solve their debt worries.

IVA service is started by the insolvency act 1986 as an alternate option to bankruptcy. This is a legally binding agreement and the debtors make proposal for the creditors to solve the debt problem.

After the contract is signed it becomes the duty of the company to help you to be out of debt. There are companies who ask you to opt for IVA even if you do not need it. As these contracts stays for few years it is important to select the company carefully. You must choose the company which specialises in this and is experienced enough to handle any situation.

The advices you are offered should be impartial. Debtors and the creditor’s perspectives should be given equal importance. The company must have valid license and aware of the regulations. Advisors and insolvency practitioners of the company should be experienced.

After you sign contract, you are given an insolvency practitioner. This practitioner negotiates with your creditors on your behalf. There are many plans from which the practitioner chooses any one which suits you the best. All this is done on the basis of your debts. Debt consolidation, lump sum payment and monthly payment are some of the option. It generally takes 5 years to clear all the debts. In most cases 75% of the total debt is cut off and the rest is paid in 5 years. Some take consolidation loans and repay all the previous debts. This helps the debtor to pay single payments to a single lender.

To avail the IVA services your minimum debts should be £15000. The minimum number of lenders required for this is 3-4 lenders. You should be able to repay 30% of your debts.

You can search for IVA companies through internet. A good research can get you the best option. It is necessary to look for licensed, experienced and honest practitioners.

Understanding bankruptcy

Bankruptcy is basically the official way of announcing that a person can no longer repay his debts in his current situation. Consequently, it is also a plan that allows the borrower to resolve his debts by dividing all his assets between his creditors. The process of dividing the said assets is duly supervised, all for the purpose of providing equal partition among creditors.

Types of bankruptcy

Because there are many different debt situations, there are also a number of different types of bankruptcy to help individuals and businesses get out of debt:

-Straight Bankruptcy requires a debtor to be within a certain asset limit or to give up property over that limit to be sold by the court. A person who successfully declares bankruptcy is able to get out of debt completely.

-Reorganization, is way for businesses or individuals with massive debts to get out of debt.

Pros of Bankruptcy

When declaring bankruptcy to get out of debt, you will not have to repay most or all of your debt.

Declaring bankruptcy could prevent foreclosure of your home, stop repossession of such items as automobiles, and keep your utilities from being disconnected.

Bankruptcy to get out of debt will often stop wage garnishments and phone calls from debt collectors and allow you to get out of debt without continued harassment.

Cons of Bankruptcy

When declaring bankruptcy to get out of debt, you will not be allowed to keep collateral owed to a creditor unless you can keep up with the payments. Declaring bankruptcy usually does not allow you to stop payment on such things as child support, student loans, alimony, court restitution orders, certain types of taxes, or criminal fines.

If you had consignors on any of your collateral, your cosigners will not be able to get out of debt with you as they are liable for part or all of the debt you discharge through a bankruptcy.

Declaring bankruptcy, in an attempt to get out of debt, will not eliminate your mortgage or any other secured loan; it will only keep these payments at bay until you have dealt with other creditors.

IVA is a very common word in U.K. When a person finds it very tough to manage the debts and is heading towards bankruptcy then at such times, he can take the resort of IVA. Now, getting information and that too appropriate one is very important. For this you will have to surf net and find out some reputed debt management companies.

While searching for IVA information you must be sure that you find out a professional company which has good insolvency practitioner. When you consult a company, firstly the company will find out that whether you are eligible for IVA or not. Firstly, in order to be eligible for IVA, you must be really having a financial crisis and multiple debts, a minimum of 15000 pounds. The insolvency practitioner as appointed by the company will then make the calculations as to your monthly income and assets. Then in regards to that one will finalize as to what payments to be made to the creditors.

IVA is helpful to both debtors and creditors. This is because the debtors will get something rather than nothing, if the debtor had filed for bankruptcy. And after the IVA contract is entered into, the debtors give a sigh of relief mainly because now the creditors lose the right to sue and make threatening calls to the debtor.

However, before you decide for an IVA, it is important that you get all the information on IVA. This is possible if you take up some research and find out more about it. There are many companies which can give you free advice on IVA. While some companies charge a very nominal fees for IVA advice.

IVA is valid for the period of maximum 5 years and thereafter if any debts still remain they are to be written off. This gives a chance to the borrower to start afresh.