The only way to truly answer to ‘Is an IVA better than a bankruptcy?’ would be to look at the failure rates of IVAs after the first 18 months.
They sound great at the outset but a significant number fail in the first two years. More importantly, the IVA companies that arrange these solutions are motivated to sell IVAs ahead of anything else as there is more profit involved and this biases their presentation accordingly.
Individual Voluntary Arrangements and bankruptcy are both legally contracted debt solutions, yet are essentially very different. The prime function of an IVA is to protect assets such as properties and businesses, which might otherwise be lost in bankruptcy.
Bankruptcy, on the other hand, is ideal for those who do not have significant assets, are living in rented and holding down everyday jobs like the rest of us. They both harm your credit rating, but it is a fact that discharged bankrupts can now get mortgages within three years (other forms of credit within 18 months), whereas there is no chance of this happening for those tied into IVAs for 5 – 7 years (many IVAs extend well beyond 60 months).
The big selling point for IVAs is that part of the debt will be written off ‘using Government legislation’ based on affordability, yet any apparent savings are soon eroded by the fee structures.
We speak to dissatisfied IVA holders who all complain about the same things: once the IVA is set up it is almost impossible to speak to anybody from the company; there are frequent ‘reviews’ and requests for more money, and there is very little understanding if anything goes wrong with your finances (illness, redundancies, etc.).
Another complaint is that nothing appears to be paid off the debt for the first two years. The reason for this is that you are paying off the set up fees during this period and not a penny goes to the creditors. ‘Is an IVA better than a bankruptcy’ is a question often asked and the answer every time will be determined by ‘What have you got to lose if you went bankrupt?’.
We could talk considerably about the injustices of IVA companies that have set up arrangements for those who should have been recommended bankruptcy at the outset, but what it all really comes down to is whether you have any assets or not. And if you don’t, you certainly wouldn’t want to be tied into an IVA for five years.
Bankruptcy UK has been helping the British public with bankruptcy since 1998 and will guide you through the process step by step. We will avoid jargon and confirm all discussions by email within 30 minutes. Call us for a chat about your circumstances on 01425 600129.