There are some key differences between an IVA and Bankruptcy. Understanding them will help you decide which is best for you.
- Will you pay more in an IVA or Bankruptcy?
- In which solution is your house at greater risk?
- Which has more impact on your Credit Rating?
- Is your job at more risk from an IVA or Bankruptcy?
Will you pay more towards your debts in an IVA or Bankruptcy?
An IVA normally involves paying an affordable monthly amount towards your debts for 5-6 years. After this as long as the other obligtions in the agreement have been met any outstanding debt is written off.
If you go bankrupt you also have to make monthly payments towards your debts if you can afford to. However these only last for 3 years.
Given this comparing the two solutions purely on the basis of monthly payments you will pay less towards your debts if you go bankrupt.
One of the main differences between IVA and Bankruptcy is that in Bankruptcy you do not have to make any further payments towards your debts if you cannot afford to.
Will your House be at greater risk in an IVA or Bankruptcy?
When considering your property there are major differences between an IVA and Bankruptcy. If you are a home owner it will normally be at less risk in an IVA. However this is not always the case.
If there is substantial equity in your property you are unlikely to have to sell your home in an IVA. However it is important to understand that you will need to try and release equity from it.
However in Bankruptcy if you have a substantial amount of equity your property could be at risk. As such in these circumstances an IVA will almost certainly be the better option.
Where there is little or no equity in your home it is unlikely to be at risk if you go Bankrupt. As such in this situation Bankruptcy should not be rulled out.
Which has more impact on your Credit Rating? IVA or Bankruptcy?
You may think that one of the key differences between an IVA and Bankruptcy is the effect on your credit rating. In fact there is very little difference. It is basically affected in the same way whichever you choose.
Both solutions are recorded on your credit file for the same period of 6 years. During this time you will find it just as difficult to get new credit whether you do an IVA or go bankrupt.
Which ever solution you use you will normally be allowed to keep your current mobile phone contact. In addition you will be able to to maintin you gas and electricity and other utility agreements.
You will be able to get a mortgage after Bankruptcy just as easily as if you were in an IVA. In fact in certain circumstances it may be possible to get one more quickly.
Is your Job at more risk from an IVA or Bankruptcy?
For most people there is little difference between an IVA or Bankruptcy in terms of employment. Which ever solution you use your employer is not informed. As such you normally carry on with your job as usual.
Having said that there are certain jobs which are more at risk from Bankruptcy. One of the these is the role of a Company Director. If you go Bankrupt you would have to resign fom this position. You do not in an IVA.
There are jobs which are affected by both solutions. If you are in the Police or Armed Forces you will have to tell your superior before starting either. The same applies for some roles in financial services.
The publicity surrounding both an IVA and Bankruptcy is the same. Your name and details are listed in the Insolvency Register. However neither are published in your local newspaper.