In the USA going bankrupt does not have the same level of stigma as it does in the UK and Ireland. In fact, for a small businessman to go bankrupt is almost like a badge of honour in America, because of the forgiving nature of the business environment there and the high regard in which entrepreneurs are held , even those who have tried and failed. Bankruptcy in the UK is almost like a kiss of death for anybody in business. It takes many years to recover from it and particularly in the area of repairing one’s credit worthiness.
An Individual Voluntary Arrangement (IVA) on the other hand carries much less stigma and it is remarkable the degree of flexibility that can be built into a well constructed IVA proposal. It can just be like a well made suit – tailored to the precise circumstances of the debtor. Once you have established that you are insolvent and have taken advice on the various financial solutions available, you must decide what to do and which option to go for. You will have considered Bankruptcy, a Debt Management Plan, the sale of your house, re-mortgaging your house, obtaining a consolidation loan, getting family or friends to assist you financially and so on. You will have considered the pros and cons of each option and listened carefully to the advice provided by your Insolvency Practitioner (IP) and his or her staff.
Before you finally make your mind up consider how each option will impact on your life. If an IVA is the right choice for you, chances are that you have realized that an IVA can be tailored precisely to your needs and that of your family and dependants. A properly constructed IVA will consider all of your circumstances starting with your income – what it is now and what it is projected to be during the term of your IVA, which is usually five years. The IVA proposal will include an Income & Expenditure Statement and allow for all reasonable living expenses for you and your family, including any unusual expenses relating to your particular situation. Creditors will of course request that any unusual expense be thoroughly explained and justified.
A good IVA proposal will also seek to anticipate and provide for future changes to your circumstances. For example, you may have a car which, during the term of your IVA, will come to the end of its useful life and will have to be replaced for safety reasons or because of the increasing costs of maintenance. The IVA proposal will have taken this into account and will outline how you will deal with this situation and allow for the necessary funds to be set aside for obtaining a replacement model. Again, creditors will accept reasonable proposals in this regard. Obviously creditors will not agree to your replacing a Mini with a Rolls-Royce – but that can hardly be claimed to be a reasonable expense.
Your IVA proposal must be realistic and your IP must avoid overlooking any matter relating to your current or likely future circumstances, particularly where it might impact adversely on your disposable income. You will receive your IVA proposal for signing before it is circulated amongst your creditors. If you do not understand any part of it or if you do not agree with its contents, then do not sign it. Contact your IP or his or her staff and outline your concern. Make sure that you fully agree with the contents of the IVA proposal and that it fully and fairly describes your circumstances. After all it’s your life, your proposal, your IVA. You will have to live with it for the next (usually) five years. Give yourself the best chance of successfully seeing your IVA through to its conclusion and finally becoming debt free.