Individual Voluntry Arrangement (I.V.A)
Bankruptcy
Put simply, bankruptcy is one of the options available to someone who cannot pay their debts. The process of going bankrupt converts assets into cash to pay off creditors. When you file for bankruptcy, there is an initial court fee for £150, although in certain circumstances this may be waived. In either case you will have to pay administration costs of £335.
You will be appointed a trustee, either an Official Receiver or an insolvency practitioner, and it is their job to dispose of your assets and pay off your creditors. For your part, you will be required to provide them with details of your financial affairs, including your assets. Your receiver will inform your creditors (such as local authorities, utilities and bailiffs) and will contact anyone who might be able to provide details of any assets or liabilities you may have (banks, mortgage lenders, solicitors, etc.). You will not be allowed to use your bank account, credit cards, etc., and you will not personally be allowed to make any payments to your creditors. Your creditors will have to claim monies from your trustee, and they should not approach you directly for payment unless in exceptional circumstances: these include creditors with whom you have a mortgage and court fines or other obligations arising from a court order (such as maintenance payments). However, you will be required to honour ongoing financial commitments such as rent payments, and utility suppliers may request a deposit for the ongoing supply of service. The arrangement of part repayment of all debts may sometimes be agreed. Having your creditors deal with your trustee directly can really take a load off your mind.
Since 2002, bankruptcy in the UK will usually last no longer than 12 months. After that time, the aim is for the bankrupt to return to a debt free life. However, it is far from an easy option, and many financial advisors won’t recommend it as a course of action unless the individual’s debts are very substantial.