Can I go bankrupt if my IVA fails?
An IVA (Individual Voluntary Arrangement) is designed to last for a set number of years (usually five). In this time, you’ll be expected to keep paying as much as you can towards your debts – but if you run into financial problems, you might not be able to offer enough to keep the IVA going.
Problems with your IVA don’t necessarily mean your IVA will fail. In some circumstances, you may be able to agree a ‘variation’ – a legal change in the terms of your IVA to suit your new circumstances, which will have to be agreed in the same way as your original IVA terms.
However, if your circumstances aren‘t likely to improve, or if the amount you can offer to repay is considerably less than you originally agreed, your lenders may be unwilling to accept a variation, in which case your IVA will fail.
What are my options if my IVA fails?
Depending on the terms of your IVA (some may require your IP to file for your bankruptcy if they fail), it‘s likely that you‘ll be able to explore alternative options. However, it’s important to ensure that you choose another debt solution that is appropriate for your circumstances.
Debt management plan
It may be possible to enter into a debt management plan, even if your IVA has failed. Because a debt management plan is an informal agreement, you may be able to get your lenders to agree to lower monthly payments than you would be able to get on an IVA. However, you will probably need a regular income for a debt management plan to be viable - and it‘s important to ensure that a debt management plan is a suitable option for you, as it wouldn’t write off any of your debt like a successful IVA would.
Bankruptcy
If it looks unlikely that you‘ll ever be able to repay your debts in full, your most appropriate option could be bankruptcy. On the plus side, your debts will be written off immediately, so you can make a fresh start – although you won‘t be discharged from bankruptcy for at least a year and you may still have to commit to regular monthly payments for up to three years. The bankruptcy will also be recorded on your credit file for six years, but the overall effects of bankruptcy could impact you for longer than this.
Published by: admin on March 30th, 2010 | Filed under Debt Management
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