![\"Bankruptcy\"](\"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-content\/uploads\/2019\/02\/Fotolia_11718894_XS.jpg\")
<\/figure><\/div>\n\n\n\nWhen debtors get into difficulties, creditors have various options \navailable to them. Frequently the initial response is to write to the \ncustomer pointing out the default. Such letters may offer some advice as\n to what the customer should do. An offer of an interview with an \naccount manager or the bank manager may be offered. The creditor may \nbegin to phone the customer. The matter may be referred to the \ncreditor\u2019s own debt collection department or to a third party debt \ncollection agency. The creditor may make a statutory demand for \nrepayment of sums in excess of \u00a3750, threatening legal action if the \ndebt is not repaid within three weeks. The legal department of the \ncreditor may write to the customer outlining a range of actions which \nmay be taken.<\/p>\n\n\n\n
How the customer addresses the problem may affect how the creditor \nbehaves. The old \u2018do nothing\u2019 or the \u2018head in the sand\u2019 approach is \nunlikely to gain much sympathy from the creditor. Creditors much prefer \nto see customers face up to their financial situation and obtain further\n advice. Such advice should be based on a thorough review of the \ndebtor\u2019s circumstances and include consideration of the full range of \nsolutions. If the debtor is insolvent, the options outlined would \ninclude entering an IVA<\/a>,\n petitioning for bankruptcy or entering a debt management plan. As the \ndebtor is insolvent, debt consolidation is not a viable option. Each of \nthe other main options has its own pros and cons.<\/p>\n\n\n\n From a creditors\u2019 point of view the least attractive option in terms \nof recovering some or all of the borrowed funds is bankruptcy, mainly \nbecause of the high costs of this process. In most consumer debt \nbankruptcy cases, creditors get no dividend whatsoever.<\/p>\n\n\n\n An IVA <\/strong>differs substantially from both bankruptcy<\/strong> and debt management<\/strong>. IVAs<\/strong>\n were born out of creditors\u2019 frustration at the low returns in \nbankruptcy. The 1986 Insolvency Act introduced IVAs for the first time. \nWith the boom in the availability of credit, particularly through credit\n cards in the last twenty years, IVAs have become more common for many \nconsumers. They are attractive to debtors who wish to avoid the stigma \nof bankruptcy and other negative effects of bankruptcy such as losing \ntheir home. Debtors also feel that they are repaying as much as they can\n truly afford to their creditors and the term of the Individual Voluntary Arrangement<\/strong> is generally limited to five years. In IVAs debtors can retain their employment or continue trading.<\/p>\n\n\n\n The IVA is also attractive to creditors \u2013 much more attractive than \nbankruptcy. For a start, they can look forward to receiving an enhanced \ndividend on the debt within a reasonable period of time. Dividends \noffered in IVAs depend on the individual circumstances but are always \nbetter than the return from bankruptcy. Creditors incur no further debt \ncollection costs either. Effectively the supervisor of the IVA collects \nthe money from the debtor and distributes it evenly among creditors. \nCreditors can also crystallize their bad debt provision in their balance\n sheet using the projected dividend from the IVA as a basis.<\/p>\n\n\n\n Bankruptcy is therefore an option of last resort for creditors and to\n suggest that people are forced into bankruptcy by creditors is untrue. A\n well constructed IVA offers a win\/win solution for creditors and \ndebtors alike.<\/p>\n","protected":false},"excerpt":{"rendered":" When customers get into financial trouble, what do creditors want them to do? The credit business is simply that \u2013 a business. Creditors want their customers to adhere to the terms of their credit contract.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[2],"tags":[],"class_list":["post-1716","post","type-post","status-publish","format-standard","hentry","category-bankruptcy-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/1716","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=1716"}],"version-history":[{"count":3,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/1716\/revisions"}],"predecessor-version":[{"id":1740,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/1716\/revisions\/1740"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=1716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=1716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=1716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}