Individual Voluntary Arrangement
An Individual Voluntary Arrangement is a formal and legally binding agreement between you and your creditors, administered by a licensed Insolvency Practitioner, which can last up to five years. It provides both parties with certain legal protections whilst you solve your debt problems.
Once the agreement is in place, your creditors must stop all further interest and charges on your debts. If you maintain the agreed repayments, any outstanding debt included in the IVA is written off at the end of the term.
This is a good solution for you, or as a joint solution with a partner, if you have two or more creditors and you are unable to pay your debts. It means that you make the best efforts to clear your outstanding debt whilst negating the possibility of losing your assets, including your home, by giving you more control over your debts.
Bankruptcy is a way of dealing with debts if you have no means of repaying them and alternatives with your creditors have failed. Bankruptcy makes you free from debts within 12 months (in most cases) and ensures your assets (if any) are shared evenly amongst your creditors.
Bankruptcy should only be considered when an individual cannot pay their debts as a matter of last resort. If you have no or little disposable income, then bankruptcy may simply be your only option. Being made bankrupt for the first time generally means you will receive your discharge one year after the date of the bankruptcy order. You may still be subject to an Income Payments order if you have a sufficient amount of disposable income available.
It is always important that you seek professional advice before declaring yourself bankrupt. It may seem very appealing to think you can be debt free in 12 months, especially if you have a high level of debt, but there are some drawbacks to bankruptcy which you need to be fully aware of, including the possibility of losing your home if you own it, amongst other things.