Jun 23 2011
Useful Inputs Regarding IVA Vs Bankruptcy Debate
You might have stuck neck deep in debt and now wondering about your options. Creditors would be knocking your doors quite too often and threatening legal action as well. In such scenario, a sensible approach is to weigh individual merits of bankruptcy and IVA. You will find the following inputs regarding the ongoing IVA vs Bankruptcy debate useful for planning your course of action.
When someone is declared bankrupt, there is a pretty serious chain of events that follow. An insolvent person may file petition for getting declared bankrupt or lenders may initiate this process to recover their dues. In either case, the Bankruptcy court where this petition is filed will appoint a trustee to take the process to completion.
Unsecured debts include credit cards, personal loans and so on. Other loans which have been obtained against collateral are not covered under insolvency. Student loans, maintenance charges, legal charges and fines etc too need to be paid by the insolvent individual on his or her own.
You will have to dispose off your possessions including vehicle, shares, stocks and other valuables. In the unfortunate scenario of your house getting sold in the process, you would need to move out. The trustee can conduct the sale process if you are unable to do that. Court and police action may follow if you do not cooperate with the authorities and court appointed trustee.
Insolvency is pretty severe on credit report as well. It can remain on your credit report for seven to ten years. Exact duration depends on particular bankruptcy chapter which is being invoked in your case. It renders the bankrupt individual unable to seek credit for a long duration of time and conduct any business.
IVA, or Individual Voluntary Arrangement is an alternative to getting bankrupt. It involves an agreement between a lender and a debtor in which debt is restructured. Current income and monthly expenses are given due consideration while deciding time and repayments under this program.
Debtors applying under this program will not be required as per law to sell their property or other assets. But they will be made to consider re-mortgaging for releasing a part of equity of their homes to pay back a portion of their dues. In case they have already done that, they cannot apply for re-mortgage again.
But the creditors need to be convinced for this program beforehand. Obtaining their consent is absolutely necessary for going forward with the program. This program becomes binding on all stakeholders once it has been approved by a majority of them (three-fourth in most cases).
The tenure of Individual Voluntary Arrangement is generally of five years or up to sixty installments. A call in this regard is taken by the court or other relevant authorities.
A call regarding these two options must be made keeping all above factors in consideration. IVA vs Bankruptcy is not an easy choice to make and an expert professional can help you out in the process. Consider discussing your prospects and filing for any one of above programs with a professional in detail.
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