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Bankruptcy is a very serious last resort for the indebted. It is a lose-lose situation for you and your creditors. You may be forced into Bankruptcy if your creditors consider they have a better prospect of recovering what is owed to them.
Implications of Bankruptcy
- You lose control of your assets
- You cannot obtain credit for over £250 without the permission from the lender
- You cannot act as a company director.
- You cannot take any part in the promotion, formation or management of a limited company (LTD) without the permission of the court.
- You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
- You may not practice as a Charted Accountant / Lawyer.
- You may not act as a Justice of the peace (JP).
- You may not become a member of parliament.
- You may not become a member of the local authority.
- Your credit is affected for many years after the annulment.
- You may be publicly examined in court.
Individual Voluntary Arrangement (IVA)
An IVA is not advertised. There is not the stigma or publicity that normally accompanies bankruptcy.
Landlords or employers are not notified unless they are a creditor.
- Does not effect professional or employment status.
Under certain circumstances, you can still be a company director or practice professional roles involving finance.
- Maintain control over your assets.
Some assets can be excluded from your proposal.
- All contact from creditors should stop completely.
Debt Plan Direct will handle all correspondence while your IVA proposal is being prepared. After which the IVA is legal binding. The creditors should not contact you again. If they do, we'll deal with the situation.
- Less costs for creditors.
Administration costs are normally lower than Bankruptcy, enabling higher dividend payments for creditors.
- Not all creditors need to agree.
Creditors who vote against the IVA are still bound by it as long as the majority (75% by value of the debt) of the creditors who have voted agree to it.
You will not be required to go to court for the IVA. Just be available to answer questions on the phone at the time of the creditors meeting.
Court proceedings can't be brought against you in respect of any of the debts bound by the Individual Voluntary Arrangement. This is provided you maintain the payments agreed in the IVA.
For some, Bankruptcy will be more suitable than an IVA. For example, an IVA requires repayments to be maintained over 5 years on debts of at least £10,000. Bankruptcy maybe a better option if you can't afford this as it does not require you to make contributions from income for 5 years.
If you qualify for an IVA then this could be your best method to clear all of your debts. Please don't wait until it's too late. |
