Thursday, 23 July 2009

IVAs and Bankruptcy

posted by debts.org at 02:47

In some cases, a debt management plan is not an option and your debts may be so great that you need to consider an Individual Voluntary Arrangement (IVA) or bankruptcy. Changes in bankruptcy laws plus increased levels of debt in the UK, has seen massive increases in people opting for IVAs or bankruptcy to help with debt problems.


Individual Voluntary Arrangement (IVA)


An Individual Voluntary Arrangement (IVA) is an agreement with all of your creditors, regarding how you will pay off your debts to them. This meeting is done under the supervision of a licensed insolvency practitioner (usually an accountant or lawyer), who will do all the work for you. A specialist debt management company will be able to advise you and arrange an IVA for you.


Advantages of an IVA


The best thing about an IVA is that it effectively stops the creditors knocking at your door, and it gives you more control about how your assets are dealt with, than if you declared bankruptcy, for example. An IVA does not affect your professional status, as bankruptcy can do. However a note of the IVA will remain on your credit record for at least six years.


Disadvantages of an IVA


An IVA can cost money to set up, which is money you could otherwise have spent paying off your debts. You should shop around for the cheapest IVA offers, when searching for an insolvency practitioner, as fees vary considerably. Debts.org can give you free advice and guidance about setting up an IVA and about finding the best debt solution plan to suit your needs. It is also worth noting that if you default on payments agreed in your IVA, your insolvency practitioner is obliged to petition for your bankruptcy. If you set up an IVA, you need to stick to the agreement rigidly to avoid further debt problems.


How long does an IVA last?


An IVA usually lasts for between two and five years, depending on your individual debt, and the time it takes you to pay off your creditors. You will be required to account for your spending and to put any extra money towards your debts, such as a pay rise. If you have equity in your home, or an endowment policy, you may be asked to cash these in to pay off part of your debt.


What does an insolvency practitioner do?


In the case of an IVA, your insolvency practitioner will help you to arrange your assets and liabilities, and to work out how much you need to live on, and how much you can afford to offer your creditors. He will then help you apply to the court for an interim order, which puts an immediate stop on your creditors taking legal action against you. The insolvency practitioner will contact all your creditors and outline your payment proposals. This can be done in writing or he can call a meeting. This largely depends on the extent of your debts, and how many creditors are involved.Providing 75% of your creditors agree to the terms of the IVA, the arrangement will then be implemented. Whatever the fee is for the insolvency practitioner, it will normally be taken out of the monthly payment you plan to repay your creditors with.


Who do I speak to about an IVA?


You can speak to our professional, helpful staff at debts.org who will guide you through the process of arranging an IVA or a debt management plan to suit your needs. Be wary of firms who advertise IVAs heavily in the press and on the TV, and of those who generate large fees by suggesting IVAs. Debts.org will recommend the right debt solution for you, and we always have your best interests at heart. Debt affects millions of people a year, and there are now more debt options to help you. There are always ways out of debt, and the first thing to do is face up to your debt problems, and take the first, important step of contacting a debt specialist company, such as debts.org, who will help you get back on your feet with a minimum of fuss.


Bankruptcy and debt problems


Never consider bankruptcy an easy way out. It really is a last resort, and the decision to declare bankruptcy may even be out of your hands. You can petition for bankruptcy yourself, but it is much more likely to be one or more of your creditors who decide to take this course of action against you.Incredibly, creditors who are owed as little as £1,000 can make you legally bankrupt. Bankruptcy for such a small sum is highly unlikely, but it is a possibility. If your debts are under £5,000 you can apply for an Administration Order instead, where the court will assess your financial situation before making a decision. It may be agreed you can pay off your debts by reaching an agreement to pay back instalments monthly.


What will I lose if I am made bankrupt?


If you are made bankrupt you will lose just about everything (depending on the extent of your debts), apart from your pension. An official receiver or insolvency practitioner will be appointed to take over the management of your finances. This means, in layman´s terms, that he will seize everything you own and sell it to clear your debts. This could include your home.


What can I keep after bankruptcy?


If your debts exceed your assets, you may only be allowed to keep some basic household goods, and/or tools which you need to work with. Any income you have which is deemed to be over the necessary amount of money you need to live on, will also have to be handed over. You will also have to tell the bank about your bankruptcy if you try to open an account.


Good news about bankruptcy


Most bankrupts will now be automatically discharged after just one year, or even earlier in some cases. This means that although you are still liable for your debts for three years after being made bankrupt initially, the remaining debts are written off, leaving you free to make a fresh start and to rebuild your life. Student loans, however will still have to be paid back.


Bankruptcy Restriction Orders


If you are considered to be dishonest, reckless or to blame for bankruptcy, you could face a bankruptcy restriction order. This can last up to 15 years, and could restrict you from getting credit of more than £500 without disclosing your status. Breaching such an order is a criminal offence, and could result in a prison term.Bankruptcy terms can differ between England, Wales, Northern Ireland and Scotland, and it is always best to seek professional advice about bankruptcy before taking it any further. Debts.org can help you make the right decisions at the right time if you are struggling with debt problems. You may find there are better alternatives to bankruptcy that you were not aware of previously, and which can help you to see a light at the end of the tunnel.