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We will only suggest an IVA if we believe that it is the best option for you but it is your choice and you must decide. Some alternatives to entering into an IVA are:
Bankruptcy
Bankruptcy is a legal process in the UK designed to assist individuals who are unable to pay their debts. It typically occurs when a person cannot afford to pay their debts. Upon the making of a bankruptcy order by the Court the bankrupt’s assets vest in the Trustee of his estate (usually the Official Receiver). The Trustee will look to realise the assets including but not limited to any beneficial interest in the bankrupt’s home and any savings or investments. Your trustee may also require you to pay any surplus income into the estate for a period of up to 36 months.
As licensed insolvency Practitioners we are used to dealing with Bankruptcy and act as Trustee in many cases. We are therefore well placed to advise as to likely implications of Bankruptcy and provide what practical help we can.
Restrictions in Bankruptcy
Bankruptcy Restrictions are legal requirements that must be followed by undischarged bankrupts. Specifically you cannot:
- borrow more than £500 without telling the lender you are bankrupt
- create, manage or promote a limited company (without the permission of the Court)
- run a business without telling any business partners the name you were made bankrupt under
- Hold certain public office (ie local Councillor)
- Work as a charity Trustee or consumer licence holder or certain other jobs
Bankruptcy typically lasts for 12 months.
Debt Management Plan
A debt management plan is an informal arrangement with your creditors. It will normally enable you to make one monthly payment to your creditors and most creditors will agree to freeze interest and charges but this is not guaranteed.
Creditors are not legally bound by a debt management plan and being in a plan does not prevent creditors from continuing to pursue debt outside of the plan. A debt management plan may be suitable for short term financial difficulties but fees charged by the debt management company will extend the length of time wit will take to pay off the debt in full.
A debt management plan can offer more flexibility than an IVA or bankruptcy but, as with these, it will have an adverse impact on your credit rating.
Debt Relief Order
A Debt Relief Order is a procedure available to individuals with debts of less than £30,000 but is not available to homeowners.
The procedure only lasts for 12 months and assets with a value of £2000 or less can be kept together with a vehicle worth less than £2,000. You cannot own a vehicle worth more than £2,000. A debt relief order s not available if you have disposable income of more than £75 per month.
You cannot act as a director of a limited company whilst in subject to a debt relief order without the consent of the Court.