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Bankruptcy or IVA?
Bankruptcy is usually seen as 'the last resort' for people with debts. If you don't think you'll ever repay your debts, bankruptcy can clear them - but at a cost:
- If you're a homeowner, you'll have to release equity - and may lose your home
- You'll lose any savings and any valuable possessions
- Your bankruptcy will be advertised in newspapers
Alternatives to bankruptcy
Depending on your situation, there may be other ways to repay your debts that will spare you the serious consequences of bankruptcy.
You may be able to avoid bankruptcy by entering a debt management plan, consolidating your debts or remortgaging your property.
For most people with really serious debts, though, an IVA may be the only realistic alternative to bankruptcy*.
What's the difference between bankruptcy and an IVA?
|Duration||Normally 5 years.||Normally 1 year, although: payments can last for 3 years, a Bankruptcy Restriction Order can last 15 years - although this is only for exceptional cases.|
|Effect on home||Very unlikely to force sale of home - but may require you to release equity.||Will force you to release equity in excess of £1,000 - and can force the sale of your home|
|Publicity||Will not be advertised. Will appear in the publicly available Individual Insolvency Register.||Will be advertised in newspapers.|
|Effect on career||Some companies may not employ someone with an IVA.||Bankrupt individuals are barred from certain positions, such as company director & local government councillor.|
* There is a new form of insolvency called a DRO (Debt Relief Order), but this is only available to people who meet very strict criteria. The most important criteria are:
- They must be unable to pay their debts.
- They must owe less than £15,000.
- Their assets must not be worth more than £300.
- Their monthly disposable income must be no more than £50 a month.
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