Both bankruptcy and an IVA (Individual Voluntary Arrangement) are forms of insolvency, but they work in different ways. Read on to find out which one might be better for you.
In this article we will look at the similarities and differences between an IVA and bankruptcy.
Firstly, it’s important to recognise that both an IVA and bankruptcy could affect your job if you work in one of the following types of role:
- Company director
- Legal or property roles
- Finance/accountancy roles
- Pub licensees
If you are unsure as to whether this will affect you, then it is advisable to contact your HR department or professional body and speak to them confidentially.
Bankruptcy and IVAs have some things in common, such as:
- They will both be recorded on your credit file for 6 years
- You will be entered in the Insolvency Register, a public record, for the duration of the agreement. Your name will be removed 3 months after the agreement has ended.
- They will both write off at least a portion of your debt. Some of the debt could be repayable as part of the debt solution.
- Your creditors will stop chasing your debt.
The differences between an IVA and bankruptcy depend on the circumstances.
If you rent your home, then how bankruptcy or an IVA will affect you will depend on what is in your rental agreement. Some landlords include a clause that states that you could be asked to leave if you go either bankrupt or file and IVA. It can be either one or the other or sometimes both.
If you own your own home and you file an IVA, then you will not be forced to sell your home. You may be asked to re-mortgage your home to realise any equity that your property may have. You will often be asked to do this 6 months before the arrangement ends, since five years of mortgage repayments will often create enough equity to pay some of your debts. If you can’t re-mortgage for any reason, then your IVA may need to continue for another 12 months.
If you own your home and go bankrupt, then your receiver (the person who manages your bankruptcy) will almost certainly demand that you sell. If there is no equity at all in the property, then you may be able to keep your home. The receiver has two years and 3 months to decide whether or not it’s appropriate to sell your property.
If you own a car and apply for an IVA you will usually be able to keep it as long as it’s a moderately priced car. If it has significant value, then you may be asked to sell it and replace it with a more modest car.
If you are bankrupt, then the receiver will almost certainly expect you to sell your car, unless you can prove it is essential for work and that it has low value.
So, the decision of whether to go with bankruptcy or an IVA can often depend on whether you have assets like property that you want to keep. Contact IVA4Me by either filling in our quick questionnaire, or phoning 0800 698 0174 for find out which solution is best for your particular situation.
If you’d like to find out more, take a look at our Bankruptcy page.