IVA or Bankruptcy? Submitted on 01.09.2010

The question of IVA vs Bankruptcy cannot be fully explored without looking at a broader view where the individual is concerned. An IVA (Individual Voluntary Arrangement) is an option where the individual makes a contribution to the debt, usually over a period of 5 years.

If more than 75% of the creditors agree to the IVA proposal then an IVA will be initiated. Voluntary Bankruptcy or Debtor's Bankruptcy is initiated by the individual and is proven by a Statement of Affairs.

These forms are available at the Local County Court or alternatively on the Insolvency Service website. Forms 6.27 and Form 6.28 must be submitted in triplicate to the court and the judge will then decide upon the outcome of the hearing.

IVA's historically offer a higher return for creditors than Bankruptcy so are better for creditors. IVA do not deal with transactions such as Transactions at an Undervalue and Preferences which are dealt with in Bankruptcy.

Owning assets does not necessarily mean you MUST enter an IVA to protect the assets. If there is little equity in the asset it may be excluded as an asset by the Official receiver in Bankruptcy. The key issues are to balance the interests of both the debtor and the creditors. As a debtor the aim is to become debt free and the lender wants as high a return as possible.

This can be achieved once a full picture of the circumstances is produced using a Statement of Affairs. If you need help to decide on which option is best for you, it is always best to speak to a professional debt advisor or a Licensed Insolvency Practitioner.

Justice Goddard provides ethical advice to individuals and businesses who are struggling with debt and have many years of experience in dealing with difficult creditors and help freeze interest and charges and in most cases have a proportion of the debt written off.