Bankruptcy or IVA
Bankruptcy is one solution to overwhelming debts that you will never be able to repay. Bankruptcy is the most severe result of being in serious debt. By declaring yourself bankrupt you do get protection from your creditors, but there are also many negative points you should be aware of:
- Your assets (including your home) may have to be sold off to pay your creditors
- Your situation will be advertised in the newspapers and made public knowledge.
- All your bank accounts and credit cards will be closed
- It does create stress and badly affect your future and reputation
- Your landlord will be informed
- You may risk losing your job
Once the bankruptcy proceedings have begun, it’s in your best interest to co-operate fully. Even if you dispute the creditors' claims it is better to try to reach a settlement before the bankruptcy order is made.
Individual Voluntary Arrangement
You could write off up to 75% of your unsecured debts with an IVA. An Individual Voluntary Arrangement (IVA) is widely used by people to avoid the stigma of bankruptcy. It acts as a legally binding agreement between you and your creditors, effectively freezing the interest charges. The debtor undertakes to makes certain payments or realise certain assets, or both, in full and final settlement of their debts. Once your IVA has been set up, your creditors can not, by law, commence or continue with any legal action to recover their debt. An IVA can only be set up with the help of a Licensed Insolvency Practitioner. A typical IVA entails you making an affordable monthly payment to the IP out of any surplus income, after living expenses, over a period of up to five years.
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