The short answer is that it depends. If your debts are out of your control and you simply can no longer keep up with them, there are a few options worth considering, and an IVA or Individual Voluntary Arrangement is certainly one of them.
In many cases, people opt for IVAs to avoid bankruptcy, in that they do indeed help many people to get back on top of their debts in a manageable way. Your own circumstances will dictate not only what your options are, but also what’s likely to land you in better financial health in the future.
Debt Help
Getting expert advice is really the best way to establish what your best option is. Insolvency Practitioners or IP’s can take a look at your overall financial state, and advise you as to which way to move. They will take into account your assets, your income and of course your total debts. There may be other options that you have not yet explored such as selling assets, that can also help you to avoid bankruptcy.
Making Choices
A good IP will be able to give you a rundown of what your choices are, and help you to come to a decision that suits you best. An IVA should generally not be seen as a way of avoiding having to pay your debts, as what it is in reality is a way to come to an agreement between you and your creditors to work those debts out.
Legal matters
When you can’t keep up with your debts there are a number of things you can do. One of these is to attempt to come to an informal agreement with your individual creditors, agreeing to make payments that you can actually afford. This can be a difficult process, and you’re really at the mercy of the creditors who will ultimately decide whether to negotiate with you or not. In some cases your creditors may choose to pursue you for the debts through the legal system, which can have some serious consequences.
Protection
One of the advantages to an IVA, is that if your creditors agree to it, it prevents them from taking further legal action against you for the debts involved, as long as you keep to the IVA payments. The IVA is a legally binding contract between you and the creditors, and so you get a certain security as a result.
Naturally, whoever you owe debt to will receive fewer funds back from you through an IVA than whatever you’ve agreed to as per your credit agreements. However, if you cannot meet these agreements, and there is a chance you will end up bankrupt, then they will receive even less back ultimately. For this reason creditors will often opt to accept an IVA, as it means greater returns for them, albeit less that what was originally agreed to.
An IVA is not therefore, a way of having your debts written off, but is rather a way to settle the debts, and move on from them once the IVA term has elapsed.