What are Bankruptcy Alternatives?
Depending on your personal circumstances, bankruptcy alternatives offer different ways of dealing with your debt. If your debt is significant it is highly likely that either bankruptcy or an IVA will be the most suitable.
If you have any questions about the alternatives to bankruptcy available to you then please feel free to ask (ask piggy).
Individual Voluntary Arrangement (IVA)
An IVA is a bankruptcy alternative used to avoid bankruptcy. You will be debt free in 5 years and it is a formal arrangement that must be supervised by an insolvency practitioner.
Through bankruptcy you may lose your house. Through an IVA, you will probably be able to keep it.
For more information on this bankruptcy alternative see the IVA CentreConsolidation Loan
One bankruptcy alternative is a consolidation loan. Providing the loan is not used for purchases, borrowing can form part of a debt solution to help restructure your debts and avoid bankruptcy. Even if you have problems obtaining credit, this may still be an option for you.
By restructuring your debt, it may be possible to reduce your montlhy financial repayments and make life more affordable. There are two types of loans available for this purpose. A secured loan or an unsecured loan.
Note: This bankruptcy alternative should be taken seriously. Your property is at risk if you do not keep up the repayments on a secured loan.
Informal arrangement or family arrangement
This alternative simply involves you writing to the creditors and entering into an informal arrangement where some form of compromise is reached. It must be stressed that this is not legally binding between the creditor and yourself and the creditor could request full payment at any time. It may however help you to avoid bankruptcy. Before making this kind of arrangement you may wish to seek advice or consider a formal arrangement such as an IVA.
Administration Order
An administration order is a bankruptcy alternative that can be sought if one or more of your creditors have obtained a court judgment against you. Your total debt must not be more than £5000 and you will need enough of a regular income to meet regular repayments to the court. There are no court fees, as a small percentage of your repayments will be taken by the court towards the costs of the administration order. If your circumstances change then you may be able to apply to the court to change the order. This is a court based procedure and may be one way in which you can avoid bankruptcy. You may wish to seek bankruptcy advice before making the decision.
Bankruptcy vs debt settlement
Bankruptcy vs debt settlement is a decision that will involve weighing up the alternatives and deciding what is best for you. Advice should always be sought when resolving financial difficulties and if bankruptcy is a consideration make sure you consider the alternatives as avoiding bankruptcy may be a more appropriate way of dealing with the debts you cannot pay.
