What is insolvency? And is an Individual Voluntary Arrangement (IVA) or bankruptcy the best option?

15 June 2014

Put simply, insolvency means you cannot pay your debts when they fall due and/or you owe more than you own. If that applies to you, you probably also are experiencing creditor pressure including legal threats or action.

You should take advice (which should be free) to understand your options and plan accordingly.

Which is the best option for you: An IVA (Individual Voluntary Arrangement) or bankruptcy?

When dealing with “Individual” insolvency cases, an IVA or bankruptcy should always be considered, along with other processes that might be appropriate, depending on particular circumstances.

A Debt Relief Order (DRO) was introduced in April 2009 especially for people with total debts, which they can’t pay, of less than £15,000.00. To apply, your total assets, excluding a car, cannot exceed £300.00 and your disposable income, after living expenses, must be less than £50.00 a month. The filing fee is currently less than £100.00 and applicants must have been living/working in England and Wales for the last 3 years, not used a DRO within the last 6 years and not be involved in any other formal insolvency processes at the time of application.

Informal arrangements are worth considering, where a professional negotiates on your behalf to set up payment plans, payment holidays and settlements. Again these are informal arrangements and not legally binding (unless willingly agreed by both parties).

Alternatives include debt management or debt consolidation schemes which have a place, but tend to be very expensive, with high set up costs and a higher percentage of the monthly payments going to the management company and not the creditors. These schemes are not legally binding and any creditor can take action at any time against you.

We’re here to help. Act now and get professional advice for free from 4Squared.

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