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  • Difference Between IVA and Bankruptcy

    IVA vs Bankruptcy

    IVA (individual voluntary arrangement) and Bankruptcy are terms in Finance. Check out main Differences between IVA and Bankruptcy.

    IVA and Bankruptcy, both are options that a person or company can choose when they have unmanageable debts and there’s no way out, in that cases you might need to consider for Bankruptcy.

    Bankruptcy gives you a chance to ‘start over’, with your debts written off. All the assets sold off and the proceeds divided among the lenders.

    Debt Managers can study and help decide whether Bankruptcy or IVA (Individual Voluntary Arrangement) is better.

    Main Differences between IVA and Bankruptcy

    • That assets are handled differently
    • The home is treated differently.
    • The time periods for each procedure are different.
    • Employment status has to be considered before choosing each procedure

    IVA (Individual Voluntary Arrangement)

    1. Duration :Typically lasts five years.
    2. Effect on home :Will require you to release any equity over 1,000. You may have to sell your home.
    3. Publicity :Won’t advertise your insolvency. It will appear in the Insolvency Register (which is publicly available).
    4. Effect on career :Wouldn’t affect your career options unless it’s a condition of your employment.

    Bankruptcy

    1. Duration :Typically lasts one year. You might have to make payments for up to three years.
    2. Effect on home :Might require you to release equity but you won’t have to sell your home.
    3. Publicity :Will be advertised in newspapers. It will also be publicly available in the Insolvency Register.
    4. Effect on career :Means you’re legally not allowed to do some jobs – like being a local government councillor or a company director..

    IVA pros & cons

    A look at the pros & cons of entering an IVA.

    The pros

    • Writes off unaffordable unsecured debt on successful completion
    • Fixed repayment plan – you’ll know how much you’re paying each month, and for how long (normally five years)
    • Protects against action from lenders
    • Can help to ensure homeowners avoid repossession (unlike bankruptcy)

    The cons

    • Will normally require homeowners to release equity in the final year of the arrangement
    • Will affect your credit rating for six years from the date the IVA is registered
    • Lasts longer than bankruptcy normally does
    • Will leave you with very little money for non-essentials

    Bankruptcy pros & cons

    A look at the pros & cons of entering bankruptcy.

    The pros

    • Once your bankruptcy is over, any outstanding unsecured debt will be written off
    • You’ll be protected against any action by your lenders
    • You could be discharged after a year
    • It could give you a chance to ‘start over’

    The cons

  • You could lose your assets, including home
  • Your bankruptcy will be advertised in newspapers
  • Your bankruptcy will stay on your credit file for six years
  • You may have to make contributions for up to three years (15 years in extreme cases, if you’re subject to a Bankruptcy Restriction Order)
  • Which one to choose IVA or Bankruptcy ?

    Individuals can’t. You need to consult expert and take their advice. It is difficult to choose.

    One thing is certain: bankruptcy is a serious step and it’s well worth exploring the alternatives. To quote The Insolvency Service:

    ‘The principal statutory alternative to an IVA is bankruptcy. Bankruptcy should always be the last resort as the debtor will lose control of their assets and will be subject to bankruptcy restrictions, potentially up to 15 years.’

    Posted under: Finance
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