Which is better for creditor, bankruptcy or IVA?

elljay

Dear all, having dithered so long hoping something would come right, I am now being threatened with bankruptcy by a creditor. I have no assets so I'm assuming he will get very little from this. If I go to him and offer to do an IVA, is he likely to get more from that?

I'm desperately keen to repay him/his company, he's nice and I feel awful that it's come to this. I really want to sit down with him and find an answer, but as things stand I just don't have the money to repay (around 20k) - I have other debts too arising from the same poor business decision making but he's the one I really want to find the best solution for though I know I can't give him preferential treatment though his is the largest debt.

What's the answer from a creditor's point of view? Thanks

LJ

debtinfo

well as in most cases the answer is that it depends. the advantages for the creditor of a bankruptcy can be a tax write off because it is clarified sooner that there is no money to be returned. also a bankruptcy allows for a thorough investigation of your circumstances so from a creditors point of view that can mean uncovering hidden assets or recovering assets that have been unlawfully disposed of.

The advantage of an IVA can be that they actually get a larger amount of their money back but with no assets to back it up they have to take a view of whether you are 1) honest in intending to actually make the payments or 2) and probably more usually whether despite intentions you really can sustain a repayment plan over a long period.

hope that helps

elljay

Thank you debtinfo, that's an immensely helpful response.

RichardMiller

According to me Bankruptcy is much better. Below are several reasons for it:
1) Bankruptcy is shorter than an IVA, as the IVA lasts for 5 years while bankruptcy may only last for 1 year.
2) You will pay less in case you get bankrupt as compared to an IVA.
3) Bankruptcy leads to an automatic stay.

In spite of these reasons it really depends on the circumstances.

elljay

Thank you. As I have no assets I was really looking for the option which would give my creditors the best return, rather than myself. On balance it looks as though, despite the tax advantage, my creditors will get a better return if I do an IVA.

Thanks again.

nolongerindenial

elljay

As someone else in business, you have to have a certain amount of selfish attitude. His costs will be considerably lower than what he has charged you, if not he not very good in business.

You are in a major mess right now if you are considering bankruptcy / IVA / DMP etc.. now is the time to put personal emotions/feelings aside with how nice your creditor is, and face upto the fact that you need to get out of this situation.

If I was you I would take some professional advice from a debt CHARITY (Not one of the companies offering to do this for you who have self interest at heart), listen to what they say is best for YOU and go with there advice.

Alternatively see if he will accept a much revised offer considering the situation you are in. But right now you need to get yourself out of this hole and use whatever is possible within the realms of the law.

dancingfairy

I would try Businessdebtline or maybe National Debtline or StepChange.
Best of Luck
df

longtermplanner

elljay wrote: »

Thank you. As I have no assets I was really looking for the option which would give my creditors the best return, rather than myself. On balance it looks as though, despite the tax advantage, my creditors will get a better return if I do an IVA.

Thanks again.

If you have no assets and no spare income each month, then your creditors will not get any return whatever you do.

If you have no assets but spare income so you could pay an IVA, then an IVA would give a higher return to your creditors because:
- bankruptcy fees are usually higher than IVA fees (not the fees you are charged for going bankrupt, but its own charges that the Insolvency Service pays off first before your creditors see a penny)
- you make payments for 5 years in an IVA and only 3 in bankruptcy

However in this situation i would suggest that you should first consider yourself, not your creditors. Don';t let the fact that you feel sorry for one of your creditors make you take a very bad decision for yourself. If you have no assets, then bankruptcy is almost certainly the best options for you.

National_Debtline

elljay wrote: »

Dear all, having dithered so long hoping something would come right, I am now being threatened with bankruptcy by a creditor. I have no assets so I'm assuming he will get very little from this. If I go to him and offer to do an IVA, is he likely to get more from that?

I'm desperately keen to repay him/his company, he's nice and I feel awful that it's come to this. I really want to sit down with him and find an answer, but as things stand I just don't have the money to repay (around 20k) - I have other debts too arising from the same poor business decision making but he's the one I really want to find the best solution for though I know I can't give him preferential treatment though his is the largest debt.

What's the answer from a creditor's point of view? Thanks

LJ

Hi elljay

I'm not sure it is appropriate or helpful to advise you from a creditor's perspective. Bad debts and write-offs are a fact of life - and business. I agree with longtermplanner above that you cannot base these decisions on an emotional response.

Your creditors will no doubt be taking advice of their own on how best to cut their losses. You don't need to seek that advice for them.

Regards

Dennis
@natdebtline

tigerfeet2006

Please ring Business Debtline and have a free impartial chat about your circumstances with them.

http://www.bdl.org.uk/