Bankruptcy is a very serious financial matter as there are long term implications which you cannot avoid. Once you have declared yourself bankrupt you will have to give up any assets of value, including your home. Your future job prospects may be limited and you will have to close any business that you run.
The good news is that there can be a bankruptcy alternative for you. Struggling with you debts does not automatically mean that you have to declare yourself bankrupt, and you should be aware of the alternatives.
Bankruptcy Alternative: Debt Management Plan
If you are unable to pay your debts as they fall due then you might want to consider a debt management plan. This is an informal agreement between you, the debtor, and your unsecured creditors.
On your behalf, we will negotiate with your creditors to find you a monthly payment that you can afford. We will work out the new lower monthly payment which is realistic for you to make, after all living costs have been deducted from your income.
As a bankruptcy alternative, a debt management plan is most suitable for those with lower level debts and struggle to afford to make the minimum payments to their debts. Some creditors are also willing to freeze any additional interest and charges on the unsecured debt, although this cannot be guaranteed.
Bankruptcy Alternative: IVA
An IVA (Individual Voluntary Arrangement) is a more formalised version of a debt management plan. It is most suitable to those who have higher levels of debt; an IVA can usually not be done for people with less than £12,000 worth of debt.
IVAs are a legally binding agreement with the debtor and the creditor. And although this can offer some real advantages, if you fail to keep to the terms of your IVA then you could be declared bankrupt.
An IVA is a bankruptcy alternative, and there are less long term implications. Your IVA will not be advertised in your local newspaper, you will not be restricted with future job prospects and you should not have to lose your home, although you may have to release some of the equity.
As an IVA is a legal procedure, this can only be proposed with the help of a licensed Insolvency Practitioner (IP). They will help you to agree an affordable monthly repayment to your creditors. You will have to commit to making this payment for an average period of 60 months.
For your IVA to be approved, creditors holding more than 75% of your total debt must vote in favour of the IVA. Even if the other 25% do not agree to the IVA, they will still be legally bound by the arrangement.
At the end of the IVA you will be free from any unpaid debt, and your creditors can no longer chase you for this debt.
Bankruptcy Alternative: Administration Order
If one or more of your creditors has gone to the county court to obtain a CCJ (County Court Judgement) against you, the court may issue you with an administration order.
As part of the order you will required to make payment to your debt through court. This should only be the case if you have less than £5,000 worth of debt and you can afford to make weekly or monthly repayments.
You can apply to the court to change the terms of the order, but failing to keep to the Administration Order means that it will be cancelled, and your creditors are free to take legal action again the debt, including starting the bankruptcy process.
Advice on which Bankruptcy Alternative is right for you.
One Advice can offer you free guidance on which bankruptcy alternative is right for your financial situation.
If bankruptcy is the right solution to your debt problems, we have a professional bankruptcy service who can guide you through the whole process of declaring yourself bankrupt.