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IVA to Bankruptcy Archives - Page 2 of 2 - Bankruptcy UK

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Why would I want to leave my IVA and enter into bankruptcy?

Perhaps the best way to answer this question is to simply state the facts and let you be the judge. 

            Some interesting points about IVAs: 

  • IVAs are intended to protect assets that might otherwise be lost in bankruptcy e.g. properties, high value vehicles, etc. If you are living in rented and only own everyday items like TVs and fridges, there is no reason to be in an IVA.
  • You will be tied into the IVA for a minimum of 60 months, but if you are on a ‘low start’ IVA i.e. paying less than you should, you will be tied in for a minimum of six years. For example, if your debts totaled £20k when you entered the IVA you should be paying around £185pm
  • The set up costs for an IVA can run into thousands of pounds and this is where your monthly payment goes for the first two years of the IVA – to the IVA company to pay the set up costs. Not a penny goes to the creditors.
  • Thereafter, a trickle of money goes to the debt collectors that bought the debt. It is a myth that you are repaying the banks you borrowed from as it has already been sold on and written off.
  • IVAs have exactly the same effect on your credit rating as bankruptcy. In the eyes of the High Street, people in IVAs are bankrupt.
  • Your credit rating is zero for a minimum of 6yrs in an IVA, whereas those discharged from bankruptcy can now get a mortgage after 36 months (credit cards in half that time). Which begs the question: why struggle in an IVA for years on end when you can be in and out of a bankruptcy in just 12 months? 

 

        Some interesting points about Bankruptcy:

  • You no longer have to attend court. Everything is done online and over the phone. You can literally go bankrupt from the comfort of your armchair.
  • Nobody comes to your house to check what assets you have
  • Bailiffs, Debt Collectors and harassing phone calls are a thing of the past
  • You are only bankrupt for a maximum period of 12 months
  • You can keep cars up to the value of £1000 (but this is often stretched)
  • You can keep your bank account provided there is no debt or overdraft in place
  • Mortgaged properties are not lost in bankruptcy if there is no equity
  • Your name no longer appears in local newspapers
  • Around 85% of those switching from IVA to Bankruptcy have no monthly payment at all while the remaining 15% have a greatly reduced monthly payment.

Perhaps the most significant point when considering whether to leave an IVA is that your financial circumstances are reassessed. It is often the case that people’s financial positions have worsened since entering the IVA and this is recognised by the court. The end result is that there is often no monthly payment – or a greatly reduced one – following bankruptcy.

If you are considering bankruptcy, we will help you throughout the process and submit your application online. Court appearances for bankruptcy are no longer required. Feel free to call us for a chat or for bankruptcy help on 01425 600129.

 

 

 

Failed IVA What Next?

I’ve been in an IVA for 4 years but it’s going to fail … the variation meeting agreed to fail the iva and issue the termination notice but the supervisor has taken no further action… what is the most likely outcome?

When you exit an IVA prematurely, the individual creditors reserve the right to pursue you with a view to setting up separate payment plans. Contrary to popular belief, there has not been a steady flow of money going to the creditors from the outset, as the IVA company would have captured its fees from the first 20 payments. It might therefore be in your best interests to seek the protection of bankruptcy. Call us on 01425 600129 to discuss options.

Bankruptcy UK offers bankruptcy help across the board and will submit your application online. Court appearances for bankruptcy are no longer required. Feel free to call us on 01425 600129 for a chat about your circumstances.

IVAs – what are the disadvantages of entering into IVA?

  • Although 70% of your debt might be written off, a large percentage of this is added back in IVA set up fees.
  • IVA fees can range from anywhere between £5000 – £13,000 depending on the amount of debt involved.
  • You may have to pay more to creditors and for much longer than you would do if you became bankrupt.
  • For example, you may have to volunteer to pay regular contributions from your salary over a period longer than three years in order to make the arrangement attractive to creditors.
  • Your home and assets may still be at risk. (There is a review conducted in the fourth year of your IVA that can ask for equity to be released from your property).
  • If the IVA fails, you can still be made bankrupt.
  • All IVAs are recorded in a public register which may make it difficult for you to apply for credit in the future. You are still classified as bankrupt as you are unable to pay your debts as they fall due.
  • Failure to re-mortgage your property in the 4th year always results in you having to remain in the IVA for a 7th year
  • You will probably need to spend more time with an insolvency practitioner working out how to realise your assets than you would spend with a trustee if you became bankrupt. The costs of paying an insolvency practitioner are high.
  • If you are in certain professions, for example, a solicitor, entering an IVA may mean that you can no longer practise, or may practise only subject to certain conditions.
  • A creditors’ meeting cannot approve of an IVA which affects the rights of a secured creditor unless that creditor agrees.
  • IVAs do not end in automatic discharge (unlike most bankruptcies).

 

 

Bankruptcy UK

Bankruptcy UK