Hi all, I have been in my IVA now for a few months, all is well so far, not much left to live on but that's that. I was wondering when I took out my IVA nobody mentioned bankruptcy to me, could someone tell me what are the benefits of an IVA over bankruptcy or even vice versa? Cheers!
This is a bit of an admission by your IP as your should always be fully aware of the pros and cons of bankrutpcy before going into an IVA.
As with all debt solutions, the advantages and disadvantages will depend on your personal circumstances. If you are a homeowner with equity in the property, this could be taken away from you if your declare bankruptcy. An IVA is often a better solution in these circumstances as it would protect you from losing the house (although you might have to release equity through a remortgage).
If you are not home owner, financially you are normally better off declaring bankrutpcy but people choose to avoid the bankruptcy option if they feel they want to pay as much as possible back to their creditors.
You should therefore be aware of how the Official Receiver would treat your home in the event that you decide to go bankrupt:
From 1st January 2011 the Insolvency Service’s policy for dealing with the family home in a bankruptcy was changed as follows:
The Official Receiver (“OR”), as trustee of the bankruptcy estate, will no longer dispose of a bankrupt’s interest in a family home until two years and three months after the bankruptcy order is made, except if an offer is received which is in the creditors’ interests to accept.
At two years and three months a review will begin. In cases where the bankrupt’s interest in the property is valued at less than £1,000, steps will be taken to re-vest the property interest in the bankrupt.
Otherwise, if there is insufficient equity to attract an insolvency practitioner to act as the trustee of a bankruptcy estate, then enquiries will be made as to whether the bankrupt or a third party would be interested in purchasing the interest, assuming the property interest may be worth more than £1,000. If it is not possible to transfer the interest, and the interest is valued in excess of £1,000, the OR will consider applying for a charging order.
If there is sufficient equity in the property, and if the OR is not aware of any willing purchaser, a Secretary of State appointment of an IP trustee may also be sought.
Regards
Andrew Bowers
Licensed Insolvency Practitoner
The main difference is that an IVA can fail, about 30% do, more expected in this recession, of course you are then back to the beginning having paid alot out in fees whereas a bankruptcy cannot fail, if you cannot meet the payments in an income payments order (if you get one) due to losing your job etc, then you do not pay, also remember bankruptcy is 12 months, an IVA is 5 to 7 years a very long time to be penniless. You say you were not given information about bankruptcy however I bet for sure your proposal will state you have.
Also with regard to Bankruptcy, please be aware that upon reviewing your income and expenditure the Official Receiver may ask you to enter into an Income Payment Arrangement, the duration of which is usually 36 months.
Regards
Andrew Bowers
Licensed Insolvency Practitoner
To add to Andrew's post, under the new rules an IPA will be for all surplus income over £20, not a percentage of anything over £100 as it was previously.
However if your income and expenditure is balanced over a period of 12 months,the official receiver can make no demands on your income,you have to agree to the income payments agreement in any case,the bankruptcy status cannot be taken from you for missing payments you can no longer afford, your discharge is automatic and you are then free to earn and inherit what you like,
As The Major so rightly mentions, there are good points to bankruptcy (given the circumstances), but there are pros and cons to any of the main debt solutions. It is best to get as well informed as possible, as everyone's circumstances differ. What is good for some isn't so good for others.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
There are not any new rules as far as the courts are concerned there are new procedures which the Insolvency Service are adopting however they need the co-operation of the debtor especially the IPA procedures, prior to December 2010 it was reasonable that income over and above £100 go over to the trustee of 50% to 70% of the amount it was worth agreeing to this however now with all income over £20 a bankrupt can no longer get a worse deal by going to the courts to let them decide. I dont think it will be very long before these changes have to be reversed otherwise official Receivers will spend more time in Court than at their desks.
If you don't agree to an IPA though, the OR can go for an IPO and that you would have to pay whether you wanted to or not.
I think it is a good thing that payments are going to be brought more into line with those in an IVA. I've always thought it wrong that we were penalised more.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
kallis3 wrote:
If you don't agree to an IPA though, the OR can go for an IPO and that you would have to pay whether you wanted to or not.
I think it is a good thing that payments are going to be brought more into line with those in an IVA. I've always thought it wrong that we were penalised more.
Hmmm --- penalised more for trying to pay back more --- logical (not)
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
