IVA v Bankruptcy?

lou756

Right then...

Over on the other boards, especially debt free wannabe, there seems to be a lot of opinions that in situations where there is no equity to protect, bankruptcy is a much better option than IVA.

At risk of this being a really, really stupid question, please could you all explain why people would be thinking this? I'm worried that I've missed something obvious that I should have thought about. I have my IVA creditors meeting coming up shortly.

Thank you in advance

Walter_J

How many reasons do you want?

An IVA will involve you paying several hundred pounds per month for five years. Play your cards right with bankruptcy and you pay nothing at all. It means you can get on with rebuilding your life immediately.

Even if you get clobbered for an IPA or IPO it is only usually for three years and the monthly payments are typically much lower.

Very many IVAs are defaulted on and end in bankruptcy anyway. That's just money down the drain - you may as well opt for bankruptcy at the outset.

If you've no equity, what is there to lose by going bankrupt? IVAs are appropriate only for certain people with assets to protect.

None of your money is going to a firm of vultures like Payplan!

I could go on and on...

Radiantsoul

IVAs are long, drawn out affairs compared to bankruptcy. The only benefit of an IVA is that it allows a person to protect assets, but in order to this you need to offer your creditors enough for them to prefer the IVA to bankruptcy.

Charco_2

Yip, it's true guys, Bankruptcy IS the easy option... (while not exactly being easy!)

The reason people take out IVAs instead of going bankrupt is NOT simply to protect assets or retain their job, although certainly that is part of the advantage that an IVA has over Bankruptcy - if that is your situation!

However people certainly do take out IVAs instead of going bankrupt.

One of the big things that sways people is the perceived stigma attached to going bankrupt. This is a more generational thing slightly older people would worry about, it is less and less of a concern for younger generations. A Bankrutpcy may be/will be advertised in a paper but do you really know anyone who reads those papers or those sections of the ordinary newspapers? An IVA can be found on the Insolvency Register but it is highly unlikely anyone is about to go searching ones-errand!

If you go bankrupt, your employer will certainly know as your tax codes will change until April but again if this doesn't concern you and wont affect your job opportunities then it shouldn't be a deciding factor for you.

The reason we find that most people opt for an IVA over BR however is that people genuinely want to make an attempt to pay back their debts. If they thought they'd get a consolidation loan to deal with the debts and pay it all back in one handy monthly installment for 25 years they would! An IVA is an opportunity for the debtor to offer their creditors some kind of return without being crippled financially indefinitely. You do what you can for 5 years and then you're free to start again instead of being punished indefinitely for one or two bad financial decisions or for unforeseen eventualities (unemployment redundancy illness recession accidents family).

People don't take out loans with the intentions of not paying them back, but when things go badly it's nice that there are still ways to remedy the debts. Certainly IVAs are no picnic and based on the financial facts BR is the easier options but for some people that's not the deciding factor.

On the BR papers there is a section that asks about other debt solutions you may have attempted before going down the BR route. This is to show the judge that you have tried to come to a better arrangement to solve your debts before simply sticking two fingers up to your creditors. BR is probably the easier way out for the reasons described in the posts above and your IP has probably already discussed the option with you - the choice is yours!

NOT "Very many IVAs are defaulted on and end in bankruptcy anyway"
Of course circumstances change and who can predict what your situation might be in five years time. Will you have the same job? Will you have two more kids? Will you be alive? An IVA can be flexible to a point but you'll find that the out of the small proportion of IVAs that fail, a lot of them fail because the debtor doesn't want to continue. They didn't/dont want to pay their debts and they don't want to pay for a solution.

***I'm not having a dig at people whose IVAs have failed, as i said above circumstances change and sometimes an IVA becomes untenable, or less important. That doesn't mean they were doomed to failure from the start***

lou756

Thank you all very much for replying and for the info and opinions given. Using this forum has made a huge difference to how I have coped with my financial problems over the past few months and I truly can't thank you all enough.

I feel I've got sound reasons both personally and job related for sticking with IVA as my best option, scared though I may still be!

Thanks again.