IVA 'v' Banruptcy

Down_not_out_2

Hi,

At what point does it become realistic to consider an IVA rather than bankruptcy?

For example if I have equity in my home and will be subject to a hefty IPA, if I will end up paying 60-70% of the total debt, is it worth Bankruptcy, or would an IVA be better?

UpToMyNeckInIt

Hi Down not out,

Welcome to the forum.

If you have a significant amount of property equity, my first though is to suggest IVA over BR. You may be required to sell the house if you go BR, whereas in the IVA you will have to attempt equity release (remortgage up to 85%LTV - subject to reasonable affordability criteria), or an extra 12-Months of IVA repayments, but at least you keep your home.

You can also have a reasonable car in an IVA, up to £6,000 or so, vs the £1,000 vehicle that you are apparently allowed under BR.

Getting home/car insurance can be a lot more problematic if you are BR as well.

Some jobs don't allow you to go BR either (check your employment contract).

Your best bet is to take all your information to your local CAB office, and speak to the debt charities: Stepchange, National Debtline etc. These organisations should be able to advise on bankruptcy impartially.

Assuming they don't try ramming a 20-Year debt management plan down your throat instead, and they refer you for an IVA, please bear in mind that this will be with 'Grant Thornton'. GT seem to have lots of customer service issues to put it politely, so are perhaps best avoided.

So if you feel an IVA is the way to go, google 'insolvency practitioner reviews' and speak to 2-3 well-regarded companies.

Also worth a look at the 'IVA support and discussion' thread on this board, where many of the issues surrounded IVA's are discussed.

Best of luck whichever direction you decide to take. Keep us posted.

Find_The_Real

Welcome DNO

Some very good points from UTMNII but I would just like to add it would also depend on what level of equity we are looking at, the amount of the debt and whether the house is in sole or joint names and if the bankruptcy is going to be joint if it is.

I would certainly speak to a few of the debt charities to get an idea of your options. A DMP is only realistic if you can pay it off in about 5-6 years if you have a surplus to pay off for your creditors. If this is not possible then I would certainly consider either an IVA or Bankruptcy. However if you feel you want pop up an SOA including debts, it may help to offer more opinions on this

http://www.stoozing.com/calculator/soa.php

UpToMyNeckInIt

Jouster: I'm no expert on BR (director of my own company, and have home equity, so not really an option for me), but I think you make an interesting point.

As I am sure OR's are well aware, house prices are rising, and a BR customer could be all the more at risk of losing the property I guess, if they have even more equity in 2 years, than they have now.

Ultimately, the OP must do his own research: speak to CAB, the debt charities, and even private-sector IP's if an IVA is being considered.

savingjenny

Jouster - so far as I know, OR's are only delaying handling beneficial equity if there is negative or negligible value - then they prefer to wait rather than accept a token payment. But if the poster has significant equity and someone makes a reasonable offer to the OR, that should be handled straight away.

This page looks at how to decide between an IVA and bankruptcy http://debtcamel.co.uk/hard-choices/iva-vs-bankrutcy/.

The IVA option is complicated at the moment because the economy is improving. A few years ago it was fairly safe to assume that many people would be unable to remortgage in the 4th year of an IVA so it would just extent for a sixth year. 6 years is a long time but at least you know where you are. But a remortgage at a poor rate of interest can be a very difficult way for an IVA to end.

UpToMyNeckInIt

Hi savingjenny,

Really useful website there. Iva vs bankruptcy in a nutshell.

Spot on about the economy as well. A new mortgage for iva customers came out in the Summer: 65%LTV and 9%apr.

Mortgage companies will gradually start to relax their criteria as the economic situation continues to improve.

Anondebtadvisor

House prices are going up in many areas and often the OR will wait 2years and 3 months to see if the property does increase in value and deal with it then, rather than accept a payment for beneficial interest.