A way to avoid bankruptcy is a guest post:
People who have a large amount of debt may think their only option is to go through the process of declaring bankruptcy. However, there are serious consequences to bankruptcy, including having it published in the local newspaper and the fact that it can affect your assets. That’s why you should always carefully consider your viable options, and maybe try to find some creative debt solutions for your financial situation.
A Way to Avoid Bankruptcy
There is an alternative to bankruptcy that not everyone is aware of. If you have debts greater than £10,000 owing to three or more separate creditors, it may be that you are eligible to have an IVA instead. IVA stands for Individual Voluntary Arrangement. This is a legal document drawn up by a third party such as a debt management company between you and your creditors. It is approved by the court, so is legally binding.
Basically, the IVA is a contract of repayment schedule agreed to by the person in debt and the creditors they owe. Creditors are not obliged to agree to an IVA but most do as it’s the best way for them to recover unpaid debts. It is also less costly and takes less time to set up compared with bankruptcy. 75% of the creditors need to agree to the IVA before it can be authorised.
The advantage for the person in debt is that usually the repayments are reduced – i.e. they don’t have to pay the full amount they owe. Also, it’s a lot easier to deal with administratively, as they only need to make one monthly repayment, which is agreed upon according to how much they owe, how much they earn and taking their monthly expenses into account. However, you should be aware if you start earning more money during the IVA period. For the person in debt, an IVA is beneficial as it means that your creditors won’t be able to take legal action against you as an interim court order protects you during the period of the IVA. The debt management company looks in depth at your financial circumstances and agrees with you what is the most reasonable repayment schedule, and in general, you will pay less each month than without an IVA in place.
An IVA can last up to five years, at which time you should be free of the debts, even if you have not paid the total amount off but provided that you have stuck to the agreed repayment schedule.
However, you should be aware that if your salary goes up during the IVA period, you can be asked to increase payments.
If you fail to meet repayments, you are likely to be declared bankrupt and in any case an IVA remains on your credit report for a period of six years. Therefore you shouldn’t sign up to an IVA unless you are committed to making the repayments.
It can be a workable solution for people with a considerable amount of debt, but it’s always best to get independent financial advice before going ahead.
I hope you have found this post on A Way to Avoid Bankruptcy useful