For people in the UK filing for bankruptcy may not be your only option for getting out of serious debt. If you have steady employment and can afford to pay a modest amount each month to pay towards your debts you can get an IVA. This stands for an individual voluntary arrangement, which is an agreement between your creditors and you that you will make payments to pay back a portion of what is actually owed. The advantage of this being that you do not have to repay the full amount of the debt, only what you can manage to pay. You make payments for a fixed period and at the end of that time any debt left unpaid is written off.

This is a formal and legally binding agreement so is not so easy to get out of as something like a debt management plan. This was introduced by the UK government to provide people with a choice so that they do not always have to go bankrupt to wipe out serious debts.

The Pros of an IVA or Bankruptcy

Before deciding on whether this arrangement is going to be better for you than becoming bankrupt, you should know the pros and cons of each of these options. The main advantages of the individual voluntary arrangement are:

You get protection from court action so your creditors are not allowed to sue you.
It is not publicized so you can keep it private if you wish to.
You only pay back what you can afford to.
Your profession is not endangered.
You will be debt free when the agreement comes to an end.
Your home will be safe as you usually are not required to sell it.
You do not lose complete control of your assets to the extent that you do with bankruptcy.
You can keep your bank accounts, but will not be allowed overdraft privileges.
Creditors cannot contact you about any of your debts.

In terms of possible disadvantages, there are a few things you need to be aware of and bear in mind when making a decision. An IVA normally lasts five years where a bankruptcy only lasts one year. You must have 15000 pounds of debt owed to at least 3 creditors for an IVA to work. You must include all your creditors in the arrangement, but you only need the support of three quarters of them for it to be implemented. You must be able to afford to make a reasonable payment towards your debts each month.

There are also pros to a bankruptcy that need to be considered when making a decision. Some of the main benefits of a bankruptcy are that you only need to be 750 pounds in debt to start the process and it only lasts one year. Your debts will be eliminated immediately upon making the bankruptcy order and once the bankruptcy is final you are free from all your debts.

The disadvantages of becoming bankrupt are quite well known and numerous. Here are a few of them:

The process has to be made public through notices in the press.
You lose all control over your assets and you may be forced to sell your home.
If you are earning good money you will be ordered to pay a certain amount each month.
Any money you inherit will be taken to pay the creditors.
Your pension can be affected.
Your credit rating will be affected for about six years.

Author's Bio: 

The author has written extensively on various issues related to debt help and has created several websites and blogs to offer help with debt to people.