How to Avoid Bankruptcy with an IVA

Bankruptcy in the UK is a problem that is growing all the time.

An increasing number of people with an unmanageable and unsustainable level of debt resign themselves to bankruptcy seemingly unaware of the IVA (Individual Voluntary Arrangement) as an alternative.

The Official Insolvency Statistics reveal that there were 13,501 bankruptcies in the fourth quarter of 2005, 11% up on the previous quarter and 38% up on the corresponding period of 2004.

And since the Enterprise Act 2002 made it possible to be discharged from bankruptcy after less than a year, many see going bankrupt as an ‘easy’ way out of their massive debts problems.

But it is far from easy when you consider the penalties and restrictions that bankrupts are subject to. For example, a bankrupt is prevented from:

* Getting credit of £250 or more without disclosing the information that you are bankrupt.

* Being a director of a company or starting up, managing or promoting a company without the consent of the court.

* Entering into a business in a different name from the one you went bankrupt with unless you inform all the people you do business with.

And that’s not all: there will be public notices of your bankruptcy and your bank and landlord will be notified, future assets will be lost, bank accounts will be closed and hired or leased goods will be returned.

So much for easy. The truth is, in fact, that bankruptcy is a situation that should be avoided wherever possible.

However, the Individual Voluntary Arrangement, or IVA, which can be entered into with the help of an insolvency practitioner, is an alternative that should be considered by potential bankrupts.

Bankruptcy will always serve its purpose for some situations but an IVA can be a solution for serious debt problems while avoiding some of the less desirable aspects of going bankrupt.

An IVA is suitable for those with unsecured debts of at least £15,000.

A majority of 75% of your creditors have to agree to the arrangement at a meeting but in the right circumstances, an IVA can wipe out a large percentage of your debt and you can get yourself debt-free in as little as five years.

A programme of monthly payments is created judged on what you can afford. And if you enter into an IVA, any legal action against you is ended and County Court Judgements are wiped. You also have the interest on your debts frozen.

And while details of your IVA are recorded on a public register and your credit file, you don’t face the legal business restrictions associated with bankruptcy or the prospect of losing your assets.

Bear in mind though that if the IVA fails, you might well face bankruptcy after all, and then all costs of the IVA will be added to your debts.

And don’t forget that there is no substitute for avoiding insolvency altogether either by taking action as soon as possible or not getting into serious debt in the first place.

For more information on the IVA, see http://www.debtcounsellors.co.uk

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