bankruptcy restrictions order register
Who is an IVA appropriate for?
An IVA (Individual Voluntary Arrangement) is often seen as a preferable alternative to bankruptcy. If someone can’t afford to repay their debts within a reasonable timeframe and wants an affordable route out of debt, then an IVA might be the right debt solution for them.
If the IVA is approved, they’ll commit (in most cases) to making regular payments for five years, and the portion of the debt they can’t afford to repay will be written off when the IVA comes to a successful conclusion.
IVAs are only suitable for people with high levels of unsecured debt (this often works out to around £15,000 or more) who:
1. Can’t afford their current monthly repayments – but can afford to make reduced fixed monthly payments for the duration of the IVA.
2. Can’t afford to repay their debt in a reasonable amount of time.
3. Want to avoid the negative effects of bankruptcy, such as losing their property.
How is an IVA different from bankruptcy?
IVAs and bankruptcies are two very different debt solutions. The differences listed below are often considered the most significant ones.
Duration
• IVA: An IVA will usually last for 5 years, and will stay on your credit report for one year after it has come to a successful conclusion.
• Bankruptcy: Generally 1 year. However:
a) Payments may continue for 3 years in total.
b) In rare cases, a ‘Bankruptcy Restriction Order’ might be arranged, which can last 15 years.
Effect on home
• IVA: An IVA may require you to release equity; it is very unlikely to force the sale of your home.
• Bankruptcy: Bankruptcy is extremely likely to force the sale of your home.
Who will know
• IVA: An IVA won’t be advertised. However, it will be shown in the Individual Insolvency Register (which is publicly available).
• Bankruptcy: Bankruptcy will be published in newspapers.
Effect on career
• IVA: Certain firms may not hire people in an IVA.
• Bankruptcy: If you’ve been declared bankrupt, you will not be allowed to work as, for instance, a company director or a local government councillor.
How is an IVA similar to bankruptcy?
While there are other similarities, the ones listed below are usually seen as the most important ones.
• IVAs and bankruptcies are both forms of insolvency.
• They both allow individuals to write of the portion of the debt they cannot afford – while repaying what they can afford.
• They both stay on a credit report for 6 years, which may mean further credit is harder and/or more expensive to come by during this time.
• They both limit the amount of money that can be borrowed while they’re in progress.
• Some debts, such as secured debts or court fines, can’t be written off by either an IVA or bankruptcy.
