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.