Bankruptcy Alternatives Article

If you are in the position where your debts are accumulating faster than you can pay them, you may file or be petitioned for bankruptcy. This wipes out the debt, but leaves the bankrupt with a permanently tarnished credit record, making it nigh on impossible for them to borrow money in the future.

There are a number of alternatives to bankruptcy that carry less of the associated restrictions, for example an administration order, an Individual Voluntary Agreement (IVA), a Debt Relief Order (DRO) or an informal arrangement. Which type of arrangement is right for you depends very much on your circumstances.

If you are not a homeowner, have little in the way of surplus income, and debts of less than 15,000GBP, then a Debt Relief Order may be suitable for you. The orders last for a year, and have the effect of preventing your creditors from taking action against you during this period.

If you do not want to involve the courts, you can sometimes reach an informal, or family arrangement with your creditors, in which you agree to a non legally binding alternative payment schedule.

Administration orders can be brought by the court if one or more of your creditors has obtained a court judgement against you. If this happens, the court becomes responsible for collecting and distributing the money you owe to your creditors.

If you have a regular income and less than 5,000GBP of total debt, then an administration order is a suitable alternative to bankruptcy, although if you do not make payments, the court can place restrictions upon you similar to those of bankruptcy.

Individual Voluntary Agreements are a formal version of the informal, or family arrangement. To get an IVA, you have to apply to the court through an insolvency practitioner.

The process of obtaining an IVA is as follows. First, you must find an insolvency practitioner to act on your behalf. Then, you must apply to the court for an interim order, which prevents your creditors from presenting a bankruptcy petition while the order is in force. You may then organise a meeting of your creditors in which they vote to accept your proposals. The main advantages of an IVA are that you get more of a say in how your assets are dealt with and you do not have to face the restrictions associated with bankruptcy.

By: Leopoldo Hores

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Leopoldo Hores has recently been looking into services that provide debt advice and has made an individual voluntary arrangement with Blair Endersby.