Last Stop Finance Debt Management

What's better, an IVA or a Bankruptcy Order?

First off, what is an IVA, you're asking? An IVA is abbreviations for an Individual Voluntary Agreement. It's a bank term more or less and represents an agreement between your creditor's and lenders, and you. An IVA generally involves the restructuring of a previous arrangement and it may be one alternative to consider before declaring bankruptcy.

Bankruptcy of course is another option when considering an Individual Voluntary Agreement. Bankruptcy is when you declare nothing and all your assets are then repossessed and sold in order to pay for your outstanding debt. Both of these options, only need to be considered when one cannot repay their debts and/or make their monthly payments, on a consistent basis.

There are definitely a few differences to consider before deciding upon an Individual Voluntary Agreement and/or bankruptcy. First off, I would like to consider bankruptcy. Bankruptcy can be devastating and shameful for some, and don't fool yourself, if you declare bankruptcy the local papers will be notified to make your problem public.

Bankruptcy involves the ceasing of all your assets, all of them! You cannot be in possession of a property, a luxury car, jewelry, nada, nada, nada! On the other hand, with the option of bankruptcy your slate is wiped clean in one year, with an IVA, it generally takes much longer, as you actually try to come up with a plan to repay your debt. An IVA generally takes anywhere between 3 and 5 years and/or up to 60 payment installments. An IVA can be structured to allow you to keep living in your home, and keep possession of some of your assets. However, similar to bankruptcy, any items considered to be luxurious assets will need to be sold and placed toward your debt repayment plan. An IVA allows you kind of a second chance, if you will, at redemption. It allows you to work the lenders and creditors to come up with a plan. They want their money, and you want your house!

One last thing to keep in mind when considering bankruptcy versus an Individual Voluntary Agreement is that in the long run, both will affect your credit score for the following six years more or less. An IVA may look a little bit better on your resume; however it is still very much there.

So when all is said and done, which is better? That really varies and depends on the individual's current situation, current holdings, and future needs. I would suggest speaking with your lender or hiring an IVA advisor to establish your current position.