Although it might feel like you have unmanageable debt, bankruptcy is not always the answer. Bankruptcy orders are made every day against people that really should have done more to avoid it, especially those who have assets to protect. The reality is that it is always less expensive to clear the debt prior to a bankruptcy order being made.
Bankruptcy alternatives – If you have assets to protect like a home or business then you really must act quickly to avoid unnecessary costs
The alternatives to bankruptcy in this instance would be to take account of your entire financial position. If you don’t know where you are financially then it’s virtually impossible to make clear and accurate choices. We can assist you with this. The options that you have when you are faced with a spiralling debt situation are:
- Do nothing – this really isn’t a good option if you are being pursued by debt collectors or Bailiffs, especially if you have assets to protect (such as a home or a business). It’s only a matter of time before the situation worsens.
- Debt management plan – Can be a really good bankruptcy alternative, but only if there is a realistic chance that there is something realistic coming up that will be able to completely or partially solve the problem. A debt management plan is an informal arrangement that can be put in place by yourself and the creditors provided there is some kind of repayment proposal that is mutually acceptable. If you don’t think you are able to arrange a debt management plan yourself there are professional organisations that can help you with this.
- Income based IVA (Individual voluntary Arrangement) – the IVA as it is known was originally created in 1986 to assist small business owners with cash flow problems. It is an arrangement that is conducted by an insolvency practitioner. Your debts and income levels are calculated, in line with affordability. Whatever figure is left over is submitted as a proposal over 60 months. The insolvency practitioner has to achieve 75% of the total debt to agree with the proposal that is being made. People can look at an IVA as an interest free debt consolidation loan where creditors are bound by the arrangement being made. Once people are in an IVA there are still options available. A majority of IVAs fail but it’s good to know that if you are struggling with your IVA and you have access to 3rd party funds then it’s quite likely that you can make a proposal to the supervisor of the IVA and make a request to creditors that saves them from waiting until the IVA to complete to receive the monies they would have received now rather than on a piecemeal basis. Not many people know this but it’s an option that is quite favourable to creditors that have agreed to a pence in the pound deal. The reason this is good is because if you fail the IVA then you go back to the position you were in prior to entering the IVA which means that creditors will start pursuing you again for the original amount of debt and your time and money spent in the IVA is wasted.
4. Asset based IVA – this is a once off IVA which again is managed by an Insolvency Practitioner. It isn’t based on your income and is based on an asset that you have and intend to sell. Provided the creditors can clearly see that they are going to receive payment in full it is highly probable that they will accept the proposal. The IVA will provide what is known as a moratorium. This stops any further action being taken against you while the IVA is in place. It is then up to you to dispose of the asset in due course and clear the debt.
Tailor made Business Debt Management Plans. If you are in business and you don’t want or need the formality of a company Voluntary Arrangement or sole trader Individual Voluntary Arrangement. then a tailor made business management plan could be the answer. It is prepared in a similar way to a CVA or IVA bust is submitted to your creditors with a time to pay offer generally consisting of monthly repayments or in sole instances a one off payment where an asset is being sold and the monies from this are sufficient to repay your creditors.