If you are in debt, declaring bankruptcy or agreeing to an individual voluntary agreement (IVA) are ways you can clear your debt and get on with your life. Both are legally binding and must be agreed by a court, which means your creditors cannot continue to ask for money after one of these two options has been enforced. There are, however, advantages and disadvantages to both that you should take into account.
What is Bankruptcy?
By declaring bankruptcy you admit to being unable to pay your debts. The process takes around 1 year and results in all of your debts being gotten rid of. You will probably be required to sell anything you own to help pay off your debts. Things you will not have to sell include anything you use for work, such as a van or tools, and your household items.
What is an IVA?
An IVA is very different from bankruptcy. An IVA can last up to 6 years and involves you agreeing to continue paying your debts during that time, either through lump sum payments or monthly amounts. Once the IVA period is over your remaining debt will be wiped out.
How Will Bankruptcy or an IVA Affect Me?
The two options come with their own, unique conditions. However, there are also some similarities between the two. For example, both will impact your career. If you declare bankruptcy you will not be allowed to start a company or serve as a director without the courts permission. If you work in the financial sector you may even be fired from your job due to common clauses in work contracts in that sector regarding personal financial insolvency.
Both options result in your name being added to the Insolvency Register, which is a public register that anyone can access. Not only can this be embarrassing but it can impact your ability to get a job. Your name will remain on the register for three months after the completion of either your bankruptcy or IVA.
Both will impact your ability to borrow money as they will be included in your credit history for 6 years. If you declare bankruptcy you will be unable to borrow more than £500 without telling the lender about your situation. You will also need to inform people you do business with that you are bankrupt.
What Kind of Debts Will A Bankruptcy or IVA Cover?
Typically, an IVA is used to pay off personal loans and credit card debts. Meanwhile, bankruptcy covers a far wider variety of debts including mortgages.
Neither bankruptcy nor an IVA will cover student debts, child support, or fines.
What Assets Will I Lose?
If you take on an IVA you will not be forced to sell your house. You will however be asked to remortgage the house if possible. The funds will then be used to pay off your debts. You will also be able to keep your personal car, provided you cannot reasonably exchange it for a cheaper version.
This is not the case if you file for bankruptcy. If you are forced to declare bankruptcy you can expect to have to sell your home and any luxury items you might own, such as a car or artwork.
If you have already paid off a substantial portion of your mortgage you can sell your home fast to release the equity in your home. This can then be used to pay of your debts. In some cases, selling your house fast can avoid bankruptcy altogether. Call us today to find out how we can help you sell your home in as little as 7 days.
Making Your Choice
Now that you know a little more about the implications of choosing bankruptcy or an IVA, it’s time to talk to an independent debt advisor. They can help you make the best decision for you based on your financial situation.
If selling your house turns out to be the best option, then call us today and we can get the process started for you. We don’t charge fees and can complete the sale in a matter of days.
