We consider whether an Individual Voluntary Arrangement (IVA) can be used to avoid going Bankrupt and what you need to think about before starting this type of Arrangement.

If you have debts that you simply cannot repay you may be looking at the option of declaring yourself bankrupt. However before going down this route it is sensible to consider whether an IVA might be a more appropriate solution.

This type of Arrangement is seen as the formal alternative to bankruptcy and may provide you with some significant benefits. We will explain what these might be but also consider when Bankruptcy might still be the better option.

An IVA gives legal protection for your property

If you are a home owner going bankrupt will mean that you will lose control of your property. The official receiver will automatically be assigned the title to your home which they can hold for three years. If there is any equity during that time it can be force sold to realise this for your creditors.

An IVA will protect your property from the official receiver. Your home cannot be sold without your agreement and your creditors are not allowed to take further legal action such as applying for Charging Orders against it.

BMD Tip: It is important to understand that if there is equity in your property you will still be obliged to release it for the benefit of your creditors. Where you are unable to do this because you simply cannot re-mortgage you will have to extend the payments you make into the Arrangement for 12 months.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

Is an IVA a better solution for company directors?

If you are a director of a limited company you will have to resign if you go Bankrupt. For this reason as a director you will want to avoid this debt solution if you want to continue running your business.

If you start an IVA instead you do not have to resign from your position and can continue running your company. On top of this if you owe any debt personally to HMRC this can also be included in the Arrangement.

IVA payments last longer than Bankruptcy

When considering the advantages of an IVA you should not think that it will always be a better solution than Bankruptcy.

For example once you are in this type of Arrangement it will normally require you to make payments towards your debts for five or six years. The amount you pay is based on your disposable income and generally will have to be at least £100 a month unless you can add additional lump sums to the agreement.

On the other hand if you go Bankrupt you will not be asked to make any payments unless you can afford to do so. Of course if you can afford to you will still have to do so. However the payments will only last for three years.