Difference Between IVA and Bankruptcy
Today, a lot of people in the UK are undergoing tough times due to financial problems brought about by an unstable economy. For some, it is because of undisciplined use of their credit cards while for some it is due to financial problems that crop up without warning. In order to get out of this rut, it is necessary to map out a logical plan. For those who have debts amounting to 15,000 pounds, you have two options.
IVA or Individual Voluntary Arrangement
This has become one of the more popular options for people who have reached an agreement with their creditors through the assistance of an IVA counsel. A legal process that was formulated by the government as per insolvency Act 1986, the debtor agrees to submit a specific payment every month for a period of 5 years to the creditor. With timely payments, the debt is written off. Any income is turned over to the creditor.
Bankruptcy
This is when a person files a legal case in the court of law in order to protect himself from the creditors. Everything you own like your house, car, and other valuables are sold and the proceeds are paid to the creditors. If there are any balances after the sale, that amount is written off. Transactions for this option are completed in a year.
Both IVA and bankruptcy remain in your record for six years although IVA is less detrimental to your reputation. With IVA you are still able to open a bank account and get a mortgage while bankruptcy will not allow you to do any of that. Between the two, the latter is more expensive although it can be done by even the jobless. If you want to continue with a career, it is better to go with IVA than bankruptcy.
In summary:
- Bankruptcy is filing a case in the court of law causing all of your assets to be sold to pay off your debts. This is usually settled within a year.
- IVA does not result to selling of your assets just a fixed agreement that entails you to pay a monthly sum for a period of 5 years
- Your credit record remains for 6 years for both IVA and bankruptcy
- You cannot open a bank account or get a mortgage if you have filed for bankruptcy while with IVA you can
- IVA is less expensive than bankruptcy but cannot be done for those who are unemployed.
- IVA is advisable for those who wish for a career.