Should I File Bankruptcy Or Not - How Else Do I Get Rid Of Debt – Bankruptcy Alternatives

                                                                                         

Serious debt problems can be very stressful and are often seen as insurmountable. When the amount owed becomes more than you could ever hope to repay, it is easy to think there is no way to begin to tackle the debt, which is when many people turn to bankruptcy as the only way out. In some cases bankruptcy is indeed the best long term solution, but it is a drastic step to take and should never be the only option considered.

In the UK the government introduced a scheme called Individual Voluntary Arrangements, or IVAs, which were originally designed as an alternative to bankruptcy for small businesses. They are now very widely used for problems of personal debt, as the consequences are less serious than with bankruptcy. They provide a full and final settlement of unsecured debts, without having the lasting legal restrictions or the stigma that filing for bankruptcy brings with it.

There are many similarities between the positive aspects of an IVA and those of declaring bankruptcy. With both courses of action your debts immediately stop mounting up and all the dealings with your creditors are taken over by someone else. This puts an end to the constant hounding by creditors that some people suffer. Unlike in bankruptcy, IVAs only cover unsecured debts, so things like mortgages cannot be included. This does mean that you are far less likely to lose your home with an IVA.

There are costs involved in either declaring bankruptcy or setting up an IVA. The companies who do this need to be paid, either in fees as with bankruptcy, or usually through your monthly payments with an IVA. However, the costs involved in setting up an Individual Voluntary Agreement should generally be less than those for filing bankruptcy.

Debt Management Plans are often put forward as alternatives to bankruptcy, and while these use a similar principle to an IVA, they are not legally binding agreements, so if any of your creditors do not want to play ball, they don’t work. With an IVA, you just need the creditors for 75% of your debt to agree to the arrangement and the rest are legally bound by it too.

To qualify for an IVA you normally need to have at least £10,000 worth of debt to more than one unsecured creditor. You will also need to be a UK resident with some regular income to pay towards your debts. Because IVA providers get fees from setting up these arrangements, some less scrupulous companies may recommend them even if they are not the best option. For this reason you need to ensure that you find reputable companies and check with more than one in order to compare offers.

About the author:
Read more information on IVAs, including recommendations for the top IVA UK Companies. K D Garrow has worked as a senior manager with significant financial responsibility for the last twenty years. His Debt UK website offers free, unbiased advice on a range of debt related issues, including payday loans, debt consolidation loans, bankruptcy and debt management plans.

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