Bankruptcy or an IVA?

In the last 3 months of 2008 alone,  30,000 people in the United Kingdom either went bankrupt or entered into an individual voluntary arrangement (IVA).

Bankruptcies make up most of this figure, but the number of people entering into IVA’s is growing rapidly.  In 2008 the number of bankruptcies increased by 30% whereas the number of IVA’s doubled. In 2009 for the first time, more people will enter into IVA’s than go bankrupt.

What is Bankruptcy?

When you are declared bankrupt, this means you are unable to pay your debts. You must apply through the courts, and then your assets will be divided up between your creditors.

What does it cost?

Typically you will pay £150 court costs, plus an additional £325 to the Insolvency Service.  You may be exempt from the court costs if you are receiving benefits.  Any costs from disposing of your assets are deducted from the proceeds of the sale.

What is an IVA?

This is an agreement between you and your creditors.  It will reduce the total debt, and interest is frozen. While it is in place, no creditor can take legal action against you.

What does it cost?

The fees for an IVA can vary. They will usually involve a setup fee and an annual supervisory fee.  The fees will be deducted from the total amount that the debtor can afford to pay.