When it comes to deciding which debt solution to choose there are often two or three options to consider. A decision may be to decide whether you should enter bankruptcy or an IVA to resolve outstanding debt problems.
The right debt solution is often dependent on your expectations as much as your financial situation. In the end, only you can decide which solution will be better for you. At Debt Support Trust our charity advice team can offer guidance on which solution you may wish to enter.
You can call us on 0800 085 0226 to get advice on bankruptcy and other debt solutions, or complete our debt analyser enquiry form. This will give you a guide as to which debt solutions you may wish to consider.
Debt Advice for Bankruptcy or IVA
There are several available debt solutions which resolve money worries, but not everybody is suitable for all of the plans. In order to understand which debt solutions you can enter you should seek debt help.
The debt advice you receive should lead you towards a debt solution or perhaps a couple different routes which could all get you debt free. The advice you receive will be based on your income, expenditure, assets and level of debt.
It’s vital to get debt help before entering a debt solution as a lot of them cannot be reversed once you’ve entered the plan. Most recently we heard about a 48 year old who had entered bankruptcy and wanted help to avoid the Official Receiver selling their property. The property had £40,000 equity and the debt was only £15,000. This assistance we could offer was limited, however there were a number of other options which would have been more suited, rather than bankruptcy.
Difference between Bankruptcy & IVA
You may have heard about a bankruptcy before – it’s the most commonly known debt solution and evokes memories or monopoly when you don’t have any money left and have no assets to sell (houses or hotels). You may even know somebody that has entered a debt solution, like a bankruptcy, and they tell you it’s the best thing they ever did. What happens to one person in a debt solution is not necessarily the same for everyone.
A bankruptcy and IVA are both insolvency debt solutions. However, there are variations of an and bankruptcy. Typically an IVA will last 5 years, while the bankruptcy will last 1 year.
Repayments: If you can afford to repay money each month then you will have to contribute towards your bankruptcy each month for 3 years in total. The cost of bankruptcy is typically £700. There is no upfront cost to enter an IVA. You can’t negotiate your bankruptcy payments, but you can put a proposal to your creditors in an IVA where you set what you can reasonably afford each month.
Assets: In a bankruptcy your assets with equity are sold. A third party (friend / family member) can purchase your share of equity if they can afford it, however, usually assets like a house are sold on the open market. In an IVA you are asked to remortgage near the end of the solution. If you are unable to remortgage and release equity then the IVA is extended for 1 extra year and you retain your property and equity.
Debts: In both the Bankruptcy and IVA you repay what you can afford and any remaining debt is written off.
Lump Sum IVA / DRO: There are variations of the bankruptcy and IVA. If you can’t afford a monthly payment to your debt but you have a lump sum of money then you could offer this money in a full and final IVA. The rest of the debt would be written off and the IVA would last usually 1 year.
The DRO is a £90 bankruptcy for people who qualify for the debt solution. The Debt Relief Order and IVA don’t require you to go to court, whereas traditional bankruptcy does.
Enter a Debt Solution
If you are ready to resolve your debt problem then an IVA or bankruptcy could be your best option. What Debt Support Trust will do is help you understand which debt solutions best meet your needs. If you are unemployed, with no assets and debts of around £10,000 then you may be best entering a Debt Relief Order. If you are in employment and want to avoid bankruptcy, then an IVA could help.
There are other debt solutions too, like a debt management plan, which you could qualify for. We will give you all of your options, with the pros and cons of each option so you can make an informed decision.
Start today by calling 0800 085 0226. Or, why not complete our confidential 10 minute debt analyser? It gives you a list of potentially suitable debt solutions.