Which is the best option for you: Bankruptcy or an IVA (Individual Voluntary Arrangement)?

Debt advice is Britain's new growth industry. Thousands of people are employed to pick up the pieces from the credit-card fuelled consumer spending boom. Many are earnest, often volunteer workers with debtors' best interests at heart. But others are little more than hard-sell operations pushing high-charge 'debt consolidation' plans which leave their victims even worse off.

Such is the growth of the debt advice business that a market of competing advisers now exists. If, like many of the callers to The UK Insolvency Helpline you fit the typical debtor profile - 10 to 12 credit cards and debts of above £12,000 - where is the appropriate place to turn to? It seems like there are 100s of private sector firms telling people that IVAs are the best option. What about bankruptcy though. So what is the best option; is it an IVA or is it bankruptcy.

Below we highlight the many drawbacks of using the IVA procedure and Bankruptcy.

The procedure you choose will be based on your particular situation. When choosing between Bankruptcy or IVA you will need to examine the advantages and disadvantages of each procedure carefully.

If a person is long tern unemployed, retired or on long term incapacity benefit then choosing bankruptcy may be your best option.

To file bankruptcy there is a lot of forms to complete and there is court filing fee to pay. Even thought the bankruptcy process is long winded it does provide the person with a fresh start.

If, however, the person is in regular employment and wants to avoid the pitfalls of bankruptcy then it will be worth considering an IVA.

Please find below the main advantages and disadvantage of bankruptcy and the issue faced when dealing with banktrutptcy:-

1. The can literally get rid of all your debts immediately upon the bankruptcy order being made.
2. When the bankruptcy is finalised you are free from any responsibility from the debts.
3. If you are earning a good salary then the trustee may ask you for some money each month. This is called an income payments order.
4. The trustee may not take any 'after acquired' assets from you, that is, after the bankruptcy order is made.
5. If you inherit money whist you are under a bankruptcy order you may have to pay your debts back.
6. During the course of the bankruptcy, if you win the lottery of come into some money then under the terms of the bankruptcy you may have to pay your debts back either partly of in full.
7. To file bankruptcy you must owe over £750.
8. If you decide that you want to make yourself bankrupt then it is very easy to file bankruptcy. All you have to do is complete some forms and pay the bankruptcy filing fee.
9. The bankruptcy period will be one year under current bankruptcy legislation.
10. A bankruptcy Order will not effect any secured lending such as mortgages or secured loans
11. A bankruptcy Order will not affect any car finance or hire purchase contracts.
12. If you have bankruptcy order on you credit file this will effect your ability to get credit for up to 6 years.
13. Your pension rights can be affected in bankruptcy.
14. Bankruptcy can be very distressing especially if you have been involved in gambling or reckless spending patterns.
15. After a bankruptcy order is made you will have to meet with a government official called the Official Receiver.
16. The debtor has a pension policy, it is vitally important that he seeks professional advice of either an IP or a bankruptcy lawyer prior to petitioning for his own bankruptcy.
17. If you are a home owner then the Trustee in bankruptcy will want you to either sell or refinance your property to release the equity.
18. There are various criminal offences in bankruptcy which may be triable on indictment by judge and jury in the Crown Court. These are:
    • Failing to disclose property or disposals to Official Receiver or trustee
    • Bankrupt removing property that he is required to deliver to Official Receiver or trustee
    • Bankrupt failing to deliver books and records to the Official Receiver or trustee
    • Bankrupt disposing of, or altering, books or records relating to his estate or affairs
    • Bankrupt making material omission in statement of his affairs
    • Bankrupt making false statement, or failing to inform trustee, where false debt proved
    • Bankrupt fraudulently disposing of property
    • Bankrupt absconding with property he is required to deliver to Official Receiver or trustee
    • Bankrupt disposing of property obtained on credit and not paid for
    • Obtaining property in respect of which money is owed by a bankrupt
    • Bankrupt obtaining credit or engaging in business without disclosing status or name in which he was made bankrupt