Bankruptcy is another option of dealing with debts that you cannot pay and is seen as a 'last resort'. 

There are some elements of bankruptcy which may appear attractive to someone who is unable to pay off their debts. For example, following changes to government legislation  (Enterprise Act 2002 which came into force in April 2004), a bankruptcy will now end (you will be ‘discharged’) after just 12 months rather than 3 years. After this you will be free from debt and no further action can be brought by your creditors, although you may still have to make payments from your income for a further 3 years.

However there are still many reasons why people should consider avoiding bankruptcy and entering into an IVA if possible. The most common reasons for this are as follows:

• With bankruptcy any property such as a house or flat will usually have to be sold. This is not the case with an IVA. 

• Other valuable assets such as a car might also need to be sold. 

• You will not be able to run a business or hold public office during the bankruptcy, whereas with an IVA there are no restrictions on being a company director and you maintain your right to hold public office.

• Bankruptcy court costs and fees are more expensive than setting up an IVA. 

• Certain employers will not accept someone who is or has been bankrupt and there are careers where being bankrupt is unacceptable such as the armed forces, police, accountancy. An IVA will not effect your employment.

• With bankruptcy your details will be publicised in the local press. An IVA is a private agreement with your creditors which means that it does not get publicised.

• Bankruptcy will seriously effect your credit rating in the future, whilst lenders tend to see an IVA as a less severe negative than bankruptcy.

The right course of action for you will depend on your personal circumstances. An IVA is not appropriate for everyone and it may be that bankruptcy proceedings are your best route out of debt.

Simply complete our no obligation enquiry form to get FREE professional and impartial advice from a licensed Insolvency Practitioner, so you can be sure that you have all the facts and are choosing the best debt solution.