Many factors could have caused a person to be overwhelmed by huge debts, debts that accumulated and became impossibly hard to pay with the current income. This hopeless financial situation could lead people to take bankruptcy as an option. Bankruptcy is one of the solutions a financially distressed individual would contemplate to take. When financial troubles are causing you to lose sleep, when creditors are harassing you, when you have sold most of your properties and when huge debts threaten to engulf you, your final and last recourse would be to file for bankruptcy.

Bankruptcy would seem to be the be-all and end-all to save a person from all financial difficulties. Certainly, bankruptcy will give a person the chance to start anew and to have a clean slate as far as debts is concerned but it also carries with it far reaching and long lasting effects. A bankruptcy will stay in your credit records for at least 10 years and the requirement to publish all bankruptcy proceedings in the London Gazette, would publicize to all and sundry your financial misfortunes.

Before opting for bankruptcy to solve a financial crisis, a debtor should take a good look at the individual voluntary arrangement option. This bankruptcy alternative would need the help of an authorized insolvency practitioner who is usually a lawyer or an accountant and who has the expertise in dealing with financial and debt problems. Together with the debtor, the insolvency practitioner will work out an arrangement or a proposed schedule of payment to be sent to the creditors.

The court, upon application will issue an "interim order". This order will have the effect of preventing any creditor from filing any bankruptcy proceedings against the debtor without the permission of the court. An insolvency practitioner plays a very important role in an individual voluntary arrangement petition. Acting on behalf of the debtor, the insolvency practitioner will meet with the creditors to discuss the terms of the individual voluntary arrangement.

A meeting between the debtor and the creditors will be arranged by the insolvency practitioner. The presence of all creditors in this meeting is very important. Aside from the discussion and negotiations, the acceptance of the proposal will be voted on. The terms of the proposal will not be binding to the creditors who are not present and who were not able to vote. After acceptance of the proposal, the insolvency practitioner will still have the responsibility of supervising the debtor to make sure that all monthly payments are paid.

In an IVA, the debtor can choose what to do with his assets. He may choose to sell all properties or retain some assets. This is not so in bankruptcy where liquidation of all the debtors assets is in the hands of the appointed trustee.

Bankruptcy or individual voluntary arrangement can be avoided if people would be more disciplined when it comes to financial matters. It is a known fact that a large percentage of debts is not caused by poor income but rather by unwise and indiscriminate spending.