Types Of Bankruptcy

There are times when bankruptcy is, without doubt, the most suitable debt solution available. It gives a person suffering with an overburdening debt problem a chance to completely wipe the slate clean and have a fresh start.

But, sometimes, in cases where the bankruptcy outcome isn’t so beneficial, there is an alternative solution, which can offer similar relief from the overburdening debt as bankruptcy, but also offers greater protection over one’s assets and more control over the future management of one’s financial affairs.

This alternative to bankruptcy is called an IVA, or individual Voluntary Arrangement and it forms part of the United Kingdom’s Insolvency Act of 1986. It is a legally binding formal arrangement designed to allow a person with serious debt problems, the chance of avoiding bankruptcy by reaching a voluntary arrangement with their creditors.

The new arrangement is based around a predetermined fixed term, which is normally set at 5 years, after which the agreement is considered successfully completed. Any outstanding debts still left unpaid at this time are legally written off and the debtor is completely debt free.

Because the IVA is a voluntary agreement, a debtor has a chance to determine what he wants to offer his creditors within his proposal, and equally, because the creditors enter the IVA voluntarily too, they have the chance to negotiate the offer outlined in the proposal if they are unhappy with any aspect of it.

Through this process of negotiation assets, such as property that would otherwise be vulnerable to a forced sale in a bankruptcy, can be protected from creditors demands to liquidate and, instead, an offer to release equity under certain controlled conditions is used to generate a better financial return.

Creditors are assured of receiving a better financial by agreeing to an IVA and as a result are often keen to reach an agreement. This is also true for the debtor. They have more control over the whole process because they can outline the proposal to reflect what’s in their interests, rather than having to accept the decision of the Official Receiver.

Similar Posts:

• ‘IVA’ the alternative to Bankruptcy
• Do all my creditors have to agree to my IVA?
• Bankruptcy or Protected Trust Deed?
• How to repay your debt
• What Does “Reasonable” Mean When You File a Consumer Proposal or Bankruptcy in Canada?

Tags: Bankruptcy, Bankruptcy Iva