Whether an Individual Voluntary Arrangement (IVA) is better than bankruptcy depends on your specific financial circumstances and goals.
An IVA is a legally binding agreement between you and your creditors to pay off your debts over a set period of time. It allows you to avoid bankruptcy and keep your assets, such as your home, provided you keep up with the payments. IVAs typically last for five to six years and any remaining debt is written off at the end of the term.
Bankruptcy, on the other hand, is a legal process that can be a quicker way to get rid of your debts, but it can also come with more severe consequences. Bankruptcy can lead to the loss of assets, including your home, and can affect your credit rating for several years.
So, if your main concern is protecting your assets and avoiding the long-term impact on your credit rating, an IVA may be a better option. However, if you have few or no assets to protect and need a fresh start as soon as possible, bankruptcy may be a better option.
It’s important to note that both options come with advantages and disadvantages, and you should seek professional advice from a debt advisor or insolvency practitioner to help you decide which option is best for you.
What If I Am A Homeowner?
On the one hand, bankruptcy can provide relief from debt and stop any legal action against you, including repossession or foreclosure proceedings on your home. However, depending on the value of your home and the amount of equity you have in it, you may be required to sell it as part of the bankruptcy process to pay off your creditors.
Additionally, bankruptcy can have a significant impact on your credit score and remain on your credit report for up to ten years, which can make it more difficult to obtain credit or loans in the future.
If you’re considering bankruptcy and are a homeowner, you may want to explore other options such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) before making a final decision.
An IVA may allow you to keep your home and make manageable payments towards your debts over a set period of time. A DMP can also help you repay your debts over time, but without the legal protection of an IVA or bankruptcy.
How Long Does Bankruptcy Take To Clear My Debts?
Bankruptcy usually lasts for a period of 12 months, after which most of your unsecured debts are discharged. However, it’s important to note that some debts, such as student loans, court fines, and child support payments, are not typically included in bankruptcy and will still need to be repaid.
During the 12-month period of bankruptcy, a trustee will be appointed to manage your finances and sell any assets that are not protected by law to repay your creditors. Any remaining debts will be written off at the end of the 12-month period, allowing you to start afresh.
It’s important to note that bankruptcy can have long-lasting effects on your credit score and financial history. The bankruptcy will remain on your credit report for a period of six years from the date it was declared, which can make it more difficult to obtain credit or loans in the future.