IVA before bankruptcy

The first two alternatives that I am putting forward are similar, but have some fundamental differences. An Informal Creditor Arrangement consists of contacting the companies or organizations that you owe money to and informally negotiating a financial settlement where you can pay back your debt at a later date. This isn’t usually legally binding, but it is often a practical option if you would prefer not to get 3rd parties involved for fear of having to pay a contribution to them.

An Individual Voluntary Arrangement is done by contacting the IVA and commissioning them to negotiate on your behalf with your creditors. The advantage of this is that agreements negotiated by the IVA are always legally binding, and you get much more choice in the affairs of your assets than you would if you filed for bankruptcy. An IVA usually lasts around five years and is designed to benefit both the person with the debt, but also the creditors (who want to get back as much of the money they are owed as possible!).

A Court Administration Order can be filed by a County Court in civil proceedings, where your current monetary status is reviewed (such as income, debt owed, your current assets etc) and then the court orders you to pay them a certain amount either monthly or weekly. The court will then compensate the creditors for the money owed to them, whilst the court charges you a small commission for this order.

Remember, these alternatives may adversely affect your credit rating which may affect your ability to obtain credit later in life. An IVA can stay on your credit rating for up to 7 years, so be very careful before considering such a financial route! That being said, the IVA is a serious alternative to bankruptcy, so be sure to consider it as a viable way to financial security.