Bancrupcy seems too drastic?

Sunrise2010

Hi everyone. Very new to all of this so looking for reassurance as much as advise really.
I phoned debt advise - who have suggested either IVA or bankruptcy as my total debts are currently £25,000 and starting to struggle to pay back due to a drastic unforeseen change in personal circumstances.
looked at both, and because I don't own a house or a car, I don't see the benefits of IVA for me. obviously, there is the stigma of 'going bankrupt', but in terms of credit, both stay on your score for 6 years, so is one really much better than the other?
Until this month, I have never missed a payment in my life. This month, I will miss one payment for one creditor. Next, maybe two, for two different creditors. But in January, I know I will not be able to pay anyone anything. Which is what has prompted this journey - I don't want to get to the point of debt collectors at the door, red letters etc.
But in my head, I imagined bankruptcy only being an option when you were about to loose the will to go on (!) My incomings / outgoings now will very clearly show that I cannot afford the repayments but I am worried they may look at my application if I submit now and just say - 'well you have only missed one payment - what's the problem?!' Total debt outgoings is about £650 - £700 pcm (minimum payments on credit cards mostly) - which is a lot to me, but in the grand scheme of things, if a friend said she was going bankrupt for £650 a month I would think she was mad!
What is bankruptcy like - in the years after? It all feels very scary - I cannot imagine not being able to get ANY credit for 6 years, by which point my daughter will be 9 years old.
I could struggle on for as long as possible, but at some point then I would get to the 'i cant go on!' moment - at which point I will be annoyed I didn't bite the bullet 'now' so the 6 years would come to an end sooner...
Help!!

Thanks for reading..

National_Debtline

Hello there.

Both bankruptcy and IVAs are formal insolvency based options, this means that they are binding on both you and your creditors. Although on the face of it that may seem scary there are lots of benefits. A key benefit is that you will be debt free at a certain point in time. With bankruptcy the debts are written-off as soon as the order has been made, with an IVA you are debt-free generally after 5 or 6 years.

There are pros and concs with both options, and to ensure that you make the right decision it is worth spending as much time as you can researching both routes. Bankruptcy is likely to be the faster and cheaper route of the two but it does have a few more implications that you may need to consider - such as the effects on employment and bank accounts. You can find out more via our bankruptcy fact sheet:

http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=01_bankruptcy

If you have disposable income you are likely to be asked to make a payment for three years in to your bankruptcy, this is known as an income payment arrangement.

If you do choose the bankruptcy option you can still apply for credit. Whilst you are undischarged (this is typically the first 12 months) you can borrow up to £500 without informing your creditors of the bankruptcy. Once you are discharged you can borrow as much as you like. Do consider, though, that both bankruptcies and IVAs will have a notible effect on your credit score, both for 6 years.

Bankruptcy isn't as scary as you might think. The process is relatively straight-forward. You would need to go to a court hearing, this isn't a long process and you are not subject to a great deal of scrutiny. it's a civil court (a county court usually) so the judges do not wear anything out of the ordinary - and it's just usually you and them. No jury or anything like that - it's not a criminal process. You will then deal with someone called an Official Receiver - it's unlikely that you'll ever meet them face-to-face. Their job is to deal with the administrative work such as informing your creditors.

Whilst you are under your IVA the creditors are prohibited from chasing you for payment and the interest and charges are frozen. It is possible that a significant percentage of debt can be written-off. It's always worth reading reviews of good insolvency practitioners.

We have a brief fact sheet comparing all options here: http://www.nationaldebtline.co.uk/england_wales/debt_advice.php#7

Our IVA fact sheet can be found here:
http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=26_individual_voluntary_arrangements

It could be worth posting your statement of account up if you can. This could help everyone make further suggestions.

Best wishes,

David @ NDL.

TheGardener

HI - I was in a similar situation and had never missed a minimum payment or a date. However, as the recession struck and prices rose but my salary was subject to a 3 year pay freeze, it became clear I wasn't even covering the interest with my payments and was facing penury into retirement and beyond. I went to Step-Change, they were amazing.

You may think its only £650 a month now, but interest rate rises are already being talked about and the cumulative effect of being constantly stressed about money and getting a little bit further behind each month means you may look back and wish you'd made a different decision.

Read everything you can find on here - ask us loads of questions and seek professional advice (free) from StepChange or one of the other specialist debt charities. That way you will be able to make a fully informed choice.
Hope it goes well