Bankruptcy and individual voluntary arrangements are similar debt solutions in the fact they both deal with insolvency issues and are legally binding formal solutions, but they work in different ways. The key difference involves the control of assets, as with bankruptcy control of assets transfers to the official receiver or trustee.
If you are renting your home an IVA will have little effect, but if you file for bankruptcy you may be asked to move if you are in rent arrears. If you own a home, some IVA’s will require you to re-mortgage your property six months before the end of the arrangement. If this is not an affordable option, the length of the IVA could be increased by additional 12 months if money cannot be found from another source. If you file for bankruptcy the receiver will make a decision about your home based on the equity you have, they have two years and three months to decide.
A moderately priced vehicle can usually be kept during an IVA arrangement, while bankruptcy will often mean a vehicle has to be sold, unless it is possible to show that a vehicle is needed to commute to work or is very low value. Within an IVA you will usually be able to continue using your bank account, providing there are no unsecured debts to the provider. In bankruptcy it is likely that all bank accounts will be frozen.
Although IVA’s are more flexible to changes in circumstances than bankruptcy, there is a longer payment period. Within bankruptcy payments will be required for a maximum of 3 years, but IVA’s usually last for 5 or 6 years, meaning it will take longer to clear the debt. Although in both processes all remaining unsecured debt is written off upon completion. To discuss debt services further, get in touch via our online IVA calculator. For more information visit website #iva.
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