IVA Versus Bankruptcy

When debt becomes too much for you to handle, and the interest accruing on your credit cards increases faster than you are able to pay it drastic action may be the only solution. But how drastic is the action that is required? That depends on your individual circumstances. In most cases, a person who is in dire straits financially is faced with two options: an individual voluntary arrangement (IVA), or bankruptcy.

If your debt has reached the point where there is no possible way you can pay it, you may have to declare bankruptcy. Often, people who declare bankruptcy have lost their jobs or suffered a severe decline in income. Sometimes unsecured debts such as credit cards become so high that it is impossible to make the minimum monthly payment. Once payments get so far in arrears that it’s impossible to catch up, it goes to a collection agency and your credit rating is destroyed. If you are in this predicament and do not own your own home or have many assets, you may have nothing to lose by declaring bankruptcy.

If you are still earning good income but are having difficulty meeting all of your obligations because of high credit card debts, an IVA can help you get your debts back to a more manageable level without having to declare bankruptcy. People who own their own homes are usually prime candidates for IVAs because they don’t want to lose their homes or other assets. They are able to pay their creditors, but not in the amounts that the creditors are demanding.

With an IVA, you may be able to salvage some of your credit rating, even though the IVA will be reported to all of the major credit agencies, negatively impacting your credit for the next six years.