When you’re feeling trapped by your debt and are struggling with making timely payments to creditors, you know that the time to take action has come. You shouldn’t take insolvency lightly but getting a statutory debt solution will allow you to get rid of all your debt faster than other solutions. When it comes to insolvency solutions, the two most popular options are bankruptcy and IVA. That’s because they allow you to write off a large part of your debt, including writing off council tax debt. There are a lot of similarities between both the insolvency options. This is why we have decided to do a comparison between them, so that you can make the right choice.
When Should You Choose a Statutory Debt Solution?
You become insolvent when you are struggling to pay your debts and when your debt amount is worth more than the value of properties you own. That is the time when a statutory debt solution becomes the best possible option for you. Both IVA and bankruptcy are forms of insolvency. This means that both debt solutions will help you clear your debts.
However, you must know that both debt solutions will require budgeting and tough decisions, and they will also affect your credit rating for around 6 years. If you’re confused about what is the best option, here are some of the main differences between bankruptcy and IVA companies.
Identifying What Both Options Mean
An IVA is a debt solution where you will be making payments for a specific time to creditors. It is a legal agreement that will be between creditors and yourself. A proposal must be created by you that will dictate the amount of money you will pay your creditors. They will vote on accepting the proposal or rejecting it. If they approve the proposal and you make all the payments based on your agreement, then all your debts will be cleared. However, if you fail to make the agreed payments, then the IVA will fail and the creditors could file a bankruptcy petition against you.
A bankruptcy is made through an online application that will cost £680. The process is different if you live in North Ireland as you will be required to fill out forms from the insolvency services or the court. The costs for residents of NI are also different as they will pay an Official Receiver’s fee of £525 and court costs of £127 along with a solicitor’s fee of £7 – bringing the grand total to £659.
All your assets like your car and home can be sold in bankruptcy to pay off your creditors. Depending on your circumstances, you will also be required to contribute a part of your income to the bankruptcy order. All the information about your assets and financial affairs will be gathered by the Official Receiver, since they will deal with creditors for you. The Official Receiver will become a ‘Trustee in Bankruptcy’ who will be handling all your affairs.