How to Avoid Bankruptcy
- See also:
- Bankruptcy Overview
- Bankruptcy FAQs
- Disadvantages of Bankruptcy
- How to File for Bankruptcy
- How to Avoid Bankruptcy
- The Effects of Bankruptcy
- UK Bankruptcy Law
- Alternatives to Bankruptcy
Bankruptcy can have long term devastating effects on an individual, both personally and professionally. As a result it is seen as one of the most negatively life altering events, along with death of a loved one and divorce.
Bankruptcy should therefore be avoided if at all possible.
This section looks at the alternatives to bankruptcy for those looking for a way to avoid going bankrupt.
If you would like to speak to an adviser about how to avoid bankruptcy and the possible alternatives to it, then please contact us by:
Calling us on free phone 0800 138 5445
This bankruptcy advice service is free of charge and impartial.
Alternatives to Bankruptcy
The Insolvency Act of 1986 introduced an alternative to bankruptcy for those with debts of over £15,000. This bankruptcy alternative was the Individual Voluntary Arrangement (also known as an IVA).
An Individual Voluntary Arrangement is a formal proposal by the debtor to his/her creditors to repay a percentage of the total debt over a period of time (usually five years). Repayments are made on a monthly basis and are calculated according to what the debtor can afford to pay.
With an Individual Voluntary Arrangement, it is not unusual for as much as 70% of the debt to be written off. Plus monthly repayments can be as little as £250.
Once the agreed percentage has been repaid the debt is deemed to have been cleared.
Why an Individual Voluntary Arrangement is a Good Alternative to Bankruptcy
Unlike with bankruptcy, if you set up an Individual Voluntary Arrangement you:
- Can keep your assets (including your home).
- Can keep your financial affairs private.
- Are not affected by professional disqualifications.
- Can continue to run a company and act as a Company Director.
- Do not have to inform your employer about your Individual Voluntary Arrangement.
- Can hold public office
Individual Voluntary Arrangements are also a good alternative to bankruptcy from the creditors' perspective.
This is because creditors tend to get less money back with by filing a Bankruptcy Petition against a debtor than they do by accepting an Individual Voluntary Arrangement. This is because:
- Court costs and professional fees of a bankruptcy are higher than an Individual Voluntary Arrangement.
- The forced sale of a property or asset does not achieve its highest selling price.
- There are less contributions to the fund.
As a result there has been a great increase in recent years of people applying for Individual Voluntary Arrangements as a way of avoiding bankruptcy.
If you would like to apply for an Individual Voluntary Arrangement please click below to complete an application form:
Individual Voluntary Arrangement Application Form
If you would like to speak to an impartial adviser about possible alternatives to bankruptcy then please:
call us on free phone 0800 138 5445, or complete the enquiry form.
This bankruptcy advice service is free of charge and impartial.
To contact an advisor call 0800 138 5445. Alternatively complete an online enquiry form and an advisor will call you back at the time that you specify.