Most people seek to avoid bankruptcy at all costs. This is because of the stigmas and disqualifications associated with going bankrupt. The government recently introduced a legitimate alternative to bankruptcy in the form of an IVA.



The rise in the number of people seeking to set up IVAs suggests that it is widely viewed as a good alternative to bankruptcy. Indeed, of the 70,000 insolvencies in 2005, one third were IVAs.

An IVA allows people in serious debt to come to a formal debt re-payment arrangement with their creditors rather than having to face bankruptcy.

IVAs are suitable for people with debts over £15,000 who can afford to pay at least £200 a month.

If a creditor agrees to accept the IVA proposed by the debtor then:

• Interest on the loan is frozen

• Legal proceedings are stopped

• The overall debt is reduced

The reason why an IVA is often a good alternative to bankruptcy is that it benefits both the debtor and the creditor.

From a creditor's perspective, an IVA is a good alternative to bankruptcy because there are no fees or legal proceeding involved with an IVA, unlike with bankruptcy.

Furthermore, an IVA offers a greater repayment of the debt than would otherwise be achieved if the debtor were made bankrupt.

From the debtor's point of view, an IVA is a good alternative to bankruptcy because it does not have any stigmas of disqualifications associated with it.

If a debtor keeps up with his or her IVA re-payments he or she will be deemed to be debt free within five years. Other advantages of an IVA that make it a good alternative to bankruptcy include:

• Monthly re-payments are based on what the debtor can actually afford to pay

• In most cases, a debtor can keep his/her car with an IVA

• With an IVA as much as 80% of the debt is written off completely

As a result, an IVA is an excellent alternative to bankruptcy and because IVAs are supported by the government the alternative is a legitimated and regulated one.