Bankruptcy Alternatives

Article Written By: ColtonCollins

If your debts are out of control, there are a number of alternatives to bankruptcy that carry less of the associated restrictions, for example an administration order, an Individual Voluntary Agreement (IVA), a Debt Relief Order (DRO) or an informal arrangement. Which type of arrangement is right for you depends very much on your circumstances.

A Debt Relief Order is an arrangement that provides some relief from debt, subject to some restrictions. They are suited to people with debts of less than 15,000GBP who do not own their own home and have little in the way of surplus income. The order lasts a year, and in that time your creditors cannot take any action to retrieve their money without prior permission from the court.

Sometimes, you can reach an informal arrangement with your creditors, also known as a family arrangement, whereby you set down a new repayment schedule. However, these arrangements are not legally binding.

If one or more of your creditors obtains a court judgement against you, then you may be put under an administration order by the court. With this type of arrangement, you only have to make payments to the court, and they will pay your creditors out of that.

If you have a regular income and less than 5,000GBP of total debt, then an administration order is a suitable alternative to bankruptcy, although if you do not make payments, the court can place restrictions upon you similar to those of bankruptcy.

Perhaps the most popular bankruptcy alternative is the Individual Voluntary Agreement, a formal, court approved version of the family arrangement. To get one, you need to get an insolvency practitioner to apply to the court on your behalf.

The process of obtaining an IVA is as follows. First, you must find an insolvency practitioner to act on your behalf. Then, you must apply to the court for an interim order, which prevents your creditors from presenting a bankruptcy petition while the order is in force. You may then organise a meeting of your creditors in which they vote to accept your proposals.

About the Author

Jacinta Buonassisi has recently been looking into services to help with debt problems and has taken bankruptcy advice from Blair Endersby.

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