Bankruptcy or Iva- Whats Your Pick?

By: Anaya Erika
Bankruptcy is not the sole way to deal with your mounting debts. There are a number of financial alternatives at the verge of mounting debt and inability to repay them. Individual Voluntary Agreement is one of the cost benefit alternatives. According to the survey of a leading financial website, In the last three months of 2007, there were 29,804 individual insolvencies in the UK. Of these, while 12,741 choose bankruptcy, more than 17,000 people decided to go through an Individual Voluntary Agreement. The number justifies the importance of the agreement and its cost- benefit.


In case of Individual Voluntary Agreement a payment plan agreed between you and your creditor. The formal and legal binding agreement means that the individual agrees to pay off part or all of the total debt burden. But it can ultimately write off up to 75% of the total debt without the stigma of going for total financial collapse .A major benefit of undergoing such agreement is that it is managed through an authorised practitioner. So you can avoid situations like selling your house to repay the loan burden or declaring yourself (or being declared) bankrupt. In case of bankruptcy, the recovery procedure involves a court using the individual's assets to repay creditors. But the IVA services often allows you to keep more control of your movable and immovable assets.


The condition of the Individual Voluntary Agreement(IVA) is that creditors with at least 75% of the value must vote in favour of it. The IVA services do not affect your credit scores. Unlike bankruptcy, this agreement allows you to keep running a current account, and have better chance of gaining credit after the procedure is over. In this regard,Bankruptcy is dangerous as it can ruin your credit rating, meaning getting a loan can be extremely difficult or impossible in the future as you loose your creditworthiness. Declaring bankruptcy also threatens the growth of your career. If you are at responsible positions like in the armed forces, bank or medicine , bankruptcy can mean you lose your license or your job. You can avoid such things by undergoing for the IVA services.


When the time frame of process is concerned some advantages are there to declare yourself bankrupt. The main one is that bankruptcy only lasts for as little as a year while with the IVA services you will be paying back your debts over a period of five years. In such agreement you pay what you can afford in monthly installments without any interest addition. After the completion of 5 years you will be debt free. The lenders are bound to the terms of the agreement, meaning they can't claim any more money from you after the 5 years.


Once in an IVA, you have to repay the debt burden on monthly basis. In case of default, creditors have to go through the practitioner who's dealing with the repayment process for you, rather than taking any action against you. You have pay the practitioner's to start this agreement. Compared to bankruptcy an IVA is generally cheaper. Still when you are unable to meet the terms of the agreement set out in the IVA, you can convert it to a bankruptcy.

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