www.iva.co.uk

Hi Guys,

I keep seeing info (All over the internet) About bankruptcy being expensive and creditors not getting much back.

I know roughly what the fees are for an IVA but I can't see much about bankruptcy (Other than the fees to be made bankrupt)

So....Why is it that bankruptcy appears to offer such low returns to creditors?

I ask partly out of interest and partly as I worry my creditors will reject an IVA and push for bankruptcy!

In bankruptcy you will be required to pay an Income Payment agreement for three years if your disposable income is £20 or more after your bills have been paid.

Creditors are unlikely to push for BR (unless one of your creditors is HMRC as they do that sometimes) and of course don't forget if you own a house you could lose that as well.

BR also lasts on your credit record for six years but you would only be on the Insolvency Register for 12 months at the most unless there are problems and they put a restriction on you for it to carry on for longer. This is usually if you have not conformed to your BR conditions.

The Bankrupty Tax is the killer - on a loose formula its about 17% on all asset realisations. The you have the O.R./Trustees fees which are usually at least the same amount of an IVA Supervisors. Then you have the petition costs to pay if a creditor forced the Bankruptcy Order. Then you have extra legal and other associated costs if an asset, such as a property, has to be repossessed and sold etc. Also contributions only last 3 years maximum.

In an IVA the IP can do the job cheaper than in bankruptcy. In an IVA the ultimate responsibility falls on the debtor and while the IP needs to do a certain level of verification they can rely on information supplied by the debtor. In a bankruptcy the IP must verify everything themselves and may have a non compliant bankrupt which increases the workload and thus the costs.