Avoiding Bankruptcy and Bankruptcy Alternatives

What is Bankruptcy?

Bankruptcy is one way of dealing with debts that you cannot pay. Bankruptcy proceedings eventually free you from overwhelming debts, however any assets that you have may be sold and the proceeds shared amongst your creditors. Bankruptcy lasts for twelve months, after which time you can make a fresh start.

Bankruptcy is the administration of the affairs of an insolvent individual by a trustee in the interests of his creditors generally.  When a person becomes bankrupt the control of all his assets, with certain exceptions, passes to a trustee whose job is to sell them and distribute the proceeds to the creditors.

Avoiding Bankruptcy

Avoiding Bankruptcy in the form of an Individual Voluntary Arrangement (IVA), this is an alternative to bankruptcy and will avoid bankruptcy. It is a legal process that gives an individual struggling with their debts protection from creditors.

The procedure enables the individual to put a proposal to his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs. A composition is an agreement under which creditors agree to accept a certain sum of money in settlement of the debts due to them. The procedure is extremely flexible and the form which the voluntary arrangement takes will depend on the terms of the proposal agreed by the creditors.

Typically an IVA lasts for between 1-5 years during which time interest on debts is frozen and repayments are made to creditors from the realisation of assets or from contributions made out of earnings. The agreement requires the approval of at least 75% in value of the creditors, and once approved is legally binding on the individual and all his creditors, whether or not they voted in favour of it. A proposal for an IVA may be made by a debtor even if he is already subject to bankruptcy proceedings.

You can read a guide to IVAs Is a Voluntary Arrangement Right for Me? from this web site.

What are the effects of Bankruptcy?

• You will have to report to the Official Receiver and provide him with details of your financial affairs
• The Official Receiver will effectively own all your assets and look to realise their value for the benefit of creditors
• You will usually have to close your bank account
• You are unable to obtain credit exceeding £500 without disclosing your bankruptcy
• The Bankruptcy Order is registered with credit reference agencies for at least six years
• Your employment may be affected depending upon what job you do
• You cannot be a company director or hold public office

What are the alternatives to Bankruptcy?

• Individual Voluntary Arrangements
• Debt Management Plans
• Final Settlements

Call us on 0800 180 4212 for immediate free advice or email us and we will contact you within 24 hours.