Individual Voluntary Arrangement (IVA) or bankruptcy – the choice between them is not an easy one to make. Neither one is easy to choose because of intricate procedure involved and serious consequences. Keeping this point in perspective, it is worthwhile to go through individual merits and demerits of both of them. Some important facts about IVA vs Bankruptcy are explained in the lines that follow.
As and when you will be declared bankrupt, your assets will be sold to make payment for dues that you accumulated over the years. An important point to note is that only unsecured debts would be paid in this way. The sale process will be supervised by a court appointed trustee or an official.
Unsecured debts include credit cards, personal loans and so on. Other loans which have been obtained against collateral are not covered under insolvency. Student loans, maintenance charges, legal charges and fines etc too need to be paid by the insolvent individual on his or her own.
Insolvency can be really painful as all assets including vehicles, shares and other possessions get sold. It may also lead to sale of one’s house, leaving him or her nowhere to go. It is the responsibility of the trustee to arrange sale of the property and possessions in case the individual is unable or unwilling to do so.
Insolvency has serious consequences on credit history and profession of the insolvents. They lose all types of savings but are allowed to keep their pension. They are not allowed to continue in business, if any, but can continue remaining employed. However if they handle monetary transactions, their employer needs to take a call regarding their employment.
Individual Voluntary Arrangement (IVA) can be considered as bit less invasive than insolvency. This is mainly because it focuses on debt restructuring rather than going after the individual. In this way, it gives an indebted individual a chance of redemption by clearing his or her dues.
Debtors applying under this program will not be required as per law to sell their property or other assets. But they will be made to consider re-mortgaging for releasing a part of equity of their homes to pay back a portion of their dues. In case they have already done that, they cannot apply for re-mortgage again.
One would need to convince at least 75% of creditors in order to be able to avail benefits of this program. Once their consent is achieved, this program will become legally binding on rest of them as well. In such a scenario, they will not be able to take any legal action against the debtors.
In most cases, IVA lasts for a period of five years. It covers overdrafts, personal loans, catalogues and credit cards etc. But it does not cover payments towards maintenance orders, fines and secured debts, if any.
Doing all the paperwork on your own might not be easy, especially if you do not know fine prints of IVA vs Bankruptcy debate. In such a scenario, consider taking help of a professional. Whichever program you choose, there is lot of wrangling to be done with lenders which ought to be left to an experienced professional.
If you want to know more about Payplan IVA’s, then please visit www.payplan.com
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Tags: Debt, finance, Financial Debt, misc, personal finance