Bankruptcy or IVA

Making a decision between bankruptcy and an IVA (Individual Voluntary Agreement) (sometimes known as Individual Voluntary Arrangements) entirely depends on your circumstances. There is no right answer, since both paths have different advantages and disadvantages. For some people, bankruptcy (see bankruptcy FAQ) is the only solution, with an IVA being a completely undesirable attempt to prolong their suffering. However, for others an IVA has clear advantages that far outweigh those of bankruptcy. Ultimately you have to make the decision yourself, and all that anyone else can do is to give you clear, objective, information about the different solutions available to you.

There are a huge number of factors that will affect your decision, things like your age, profession, education, and even your mental state of mind can make a huge difference. For example, if you don’t have a strong believe in your prospects for the future and your ability to remain financially restrained, then bankruptcy will be the best option However, if you feel that bankruptcy will cripple your future both socially and professionally, then an IVA is the clear way forward. Both solutions will lower your credit rating and make it difficult for you to get credit in the future; however, if you’ve successful worked your way through an IVA, you could in the future build your credit rating to something more respectable, a bankruptcy will be a stain on your record for as long as you live.

Bankruptcy is a lengthy and painful procedure for most people, including the banks. You will be forced to sell your home and any other assets you have that could be used to pay the outstanding debt. You may also find that your social life takes a huge blow, this may seem like a small price to pay but in the future it could affect you. There is a still a strong social stigma attached to bankruptcy, and the stereotypical view of a “failure” is still a very real concern. However, if you just want to get away and escape the area you are in, bankruptcy can help you sever the ties you had built in a matter of weeks. Bankruptcy also affects your ability to work in certain positions, and rules out escape to the army as an option straight away. Some people never recover from bankruptcy, because mentally it is a huge blow that is difficult to bounce back from.

An IVA, on the other hand, will keep you financially restrained for approximately five years. You may still have to sell some of your liquid assets and any luxury purchases will almost certainly have to go. You’ll be living well within our means for quite a long time, so unless you have the willpower and restraint to do this, an IVA may well not be the best plan. An IVA does allow you more freedom than bankruptcy in terms of your future, and socially it is not nearly as frowned upon as bankruptcy. You don’t have to tell a soul about entering into an IVA, whereas bankruptcy is an extremely public procedure. However, living with the incredible stress, sleepless nights, and financial vigilance is not for everyone.

If you feel you have a stable profession, and your debt was driven by overspending rather than a lack of income, then an IVA is nearly always the best option. Remember that bankruptcy is a pretty final process, there is no going back and you’ll always have that as a mark against you. However, if you can shake this off and pick yourself up, then bankruptcy could be the fastest way for you to become financially independent again.

Don’t enter into anything you are unsure about. If you enter into an IVA, you are stuck with it for years afterwards, whilst if you declare bankruptcy your life may never be the same again. Seek advice from professionals and make sure you have thought about your plan of action after you have chosen a solution. Look into the long term and decide what is best for you. Financial difficulties are an all-too-common fact of life and many people have to face them, so don’t feel ashamed if you have to make this decision, just try to take the right path.

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