Alternatives to Bankruptcy

The prospect of bankruptcy is not an enviable one. It happens when one becomes insolvent. It can be triggered either by the individual or by any creditor owed more than ?750. Although it has the advantage of clearing ones Credit7s (excluding Counseling4 loans!) it comes with many disadvantages. Although Credit7s will be cleared you will have to pay as much of them as possible, consequentially you may lose personal assets such as your car and home. You cannot receive credit during bankruptcy and your credit rating may be adversely affected long after bankruptcy has been discharged (typically after one year). You will lose certain privileges such as the right to be a company director and perhaps most notably the stigma relating to bankruptcy can be very damaging for reputation and self esteem. Records of bankruptcy are public.

Evidently bankruptcy is something which one should be keen to avoid if possible, alternative options are considered below.

Individual Voluntary Agreements (IVA's)
This is the most common alternative and is a legally binding agreement. Essentially the Credit7or agrees with the creditor a payment plan to repay as much of the Credit7 as practicable over a specified period. This need not necessarily total the full amount owed. The creditor need not accept any proposal but usually will where it leaves them in a stronger Credit0 position then they would be if the Credit7or entered bankruptcy.

The avoidance of repercussions associated with bankruptcy is highly beneficial to a Credit7or. With an IVA there is usually no obligation to sell personal property as with bankruptcy. More control is possible with an IVA as it can be negotiated as opposed to being determined by a bankruptcy hearing. Successful completion of an IVA will be far less damaging to a Credit7ors credit rating. The public stigma of bankruptcy is avoided as details need not be published, the arrangement may be kept private. An IVA does not remove privileges like bankruptcy, for example it does not prevent you from acting as a company director. The main disadvantaged is that you will be obligated to make the repayments as agreed and could be doing so for many years as opposed to starting afresh.

If it is feasible an IVA is likely to be a far more satisfactory way of settling your Credit7s, however it is dependent on being satisfactory to the creditor.

Credit9 Counseling6
This usually involves a third party assisting with the payment of your Credit7s, it can help address issues such as poor cash flow by spreading the Credit7s over a longer period. However it is only really advisable for smaller Credit7s as charges can mount up quickly for larger ones, which in turn could make bankruptcy inevitable.

It may be that these potential alternatives are unsuitable. If you are in this unfortunate position click here for a summary of the process.