The Alternatives to Bankruptcy

The Alternatives to Bankruptcy

Bankruptcy can be an awful situation to find yourself in. When a person is made bankrupt most of their assets including their home vests in the official receiver, who often appoints a trustee in bankruptcy to then investigate the bankrupt’s affairs.

The trustee and his solicitor will look to sell the bankrupt’s home and his other assets to pay all of the debts and expenses of the bankruptcy. This process is expensive, often resulting in the family home being sold to pay off the trustee and his solicitors’ costs irrespective of whether the creditors will eventually be paid.

There are alternatives to bankruptcy, including;

  • Individual voluntary arrangements, also known as an IVA
  • Debt management plans, also known as a DMP

The problem with an IVA is that if you do not comply with its terms then the supervisor of the IVA is bound to act in the creditors interests and bankrupt you. Other disadvantages include your name appearing on a register of IVA’s, with the IVA lasting for five years and the family home being revalued at the end of the process to see as to whether any surplus equity can be paid to the creditors.

It is often far more effective for a skilled solicitor to enter into informal agreements with the various creditors which do not need to be the same in terms of offering them the same percentage amount as is the case in IVAs. The other advantage is that there is no fixed five-year term and your name does not appear on the IVA register, whilst also noting that negotiation is also often far more cost-effective and less intrusive.

The last thing you should do is to simply bury your head in the sand and foolishly hope for the situation to disappear. It is far more sensible to take stock of the situation and to enter into sensible discussions with creditors in seeking to enter into affordable and realistic deals. A specialist solicitor can help with this process or advise what you should do to avoid being made bankrupt and risk losing all your properties including your home.