Is there an alternative to bankruptcy?

Perhaps you’ve been struggling with money, maybe your company or house is in danger of being repossessed. Regardless, this situation is certainly a stressful one.

Finding an alternative solution is important and one of the most well-known which comes to mind is bankruptcy. However, for some, it can be a scary word.

Although it can be a fresh start, it is a big step – and does carry serious consequences. For example, although your debts should be resolved:

  • Your assets, such as your home, company, and car may be sold to repay your lenders.
  • Bankruptcy will be recorded on your credit file. As a result, you will probably find it very hard to obtain loans or financial products in the future.
  • You will be unable to work in certain professions.
  • Your bankruptcy will be recorded in a public database called the Insolvency Register.

According to the Insolvency Service, every quarter there are more than 4,000 bankruptcies. Fortunately, there are alternatives to help you avoid this situation and potentially keep your assets secure.

IVA – a more popular form of insolvency

Although the Insolvency Service records more than 4,000 bankruptcies every quarter, the average number of IVAs during that time is more than 18,000. Seemingly a more popular solution, this is often considered superior to bankruptcy as your assets are protected during this agreement. Furthermore, generally speaking, an IVA is more socially acceptable than bankruptcy.

With an IVA, interest and charges are frozen on your debts. Over the course of the arrangement, which usually lasts about five or six years, you make monthly repayments towards your creditors. Once the IVA is complete, any remaining debts are written off.

Debt relief orders – For £20,000 or less

A debt relief order lasts for 12 months and freezes interest rates as well as charges so you can get on top of your finances. During this time, if your financial situation hasn’t improved, your debts are written off.

However, if you have assets worth over £1,000, you will not be eligible for this solution. According to the Insolvency Service, more than 6,000 debt relief orders are taken out every quarter.

Is bankruptcy the only option left?

If you’re drowning in debt and don’t see a solution apart from bankruptcy, there may be an alternative available to you. At the very least, declaring bankruptcy is a very big decision. Consequently, you should seek advice from a reliable debt expert before committing to this choice. Potentially, they might identify a better solution.