Bankruptcy isn`t the only option for people with debts they can`t afford to repay. There are a few alternatives, including IVAs (Individual Voluntary Arrangements).
IVAs are often considered a preferable alternative to bankruptcy, as they avoid some of bankruptcy`s downsides (like the possibility of losing your home). That said, bankruptcy can still be the best option for many people.
An IVA is a legally binding agreement with your lenders which allows you to clear your unsecured debts in an agreed period of time (usually five years), during which you`ll pay as much as you can towards those debts.
On successful completion of this agreement, any remaining unsecured debt will be written off and you`ll be debt-free. (Note that an IVA can`t write off secured debts like mortgages.)
If you think an IVA may be the best option for clearing your debts, there are a few things you`ll need to consider. For example, it`s a form of insolvency - like bankruptcy - and as such it will have a significant impact on your credit rating, which could make borrowing money a lot more difficult / expensive in the future.
Also consider that even though your IVA is extremely unlikely to end up with you losing your home, you may still be required (if you`re a homeowner) to release some of the equity in your home in the final year.
As we discussed earlier, IVAs can be preferable to bankruptcy for some people, but not others.
Bankruptcy may still be more appropriate for you, depending on your circumstances. It`s usually over more quickly than the typical IVA - you`ll usually be discharged within a year - and it won`t necessarily involve making regular monthly payments (unless you can afford them).
But deciding on the right solution is more difficult than just reading about it. You should always seek the opinion of an expert debt adviser, who can recommend the right debt solution for you, based on your individual circumstances.
To speak with one of our advisers about your debts, click here for a free call-back at a time that suits you, or call 0800 195 2911.
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