Options for the Individual

 

For a quick guide at a glance of your options and the impact to each click here

 

Refinancing

Sell surplus assets or re-mortgage your home so the funds can pay your debts

Advantages

Disadvantages

  • Keep credit rating intact
  • No professional costs
  • Easy to achieve
  • Must be affordable
  • Must have assets available

Informal arrangement

Negotiate with creditors individually to achieve a settlement of the entire debt, reduce interest payments or extend terms of agreement

Advantages

Disadvantages

  • Cheap to achieve
  • Can reduce pressure if agreement reached
  • Not legally binding
  • Not all creditors may agree
  • Credit rating still affected

Individual voluntary arrangement (IVA)

Formal agreement with all creditors to agree settlement of debts at a rate usually less than 100%

 

 

Advantages

Disadvantages

  • All creditors bound
  • No comeback from creditors as long as agreement is maintained
  • Agreement is completely flexible
  • Costs of IVA can be drawn from contributions
  • Needs 75% in value of creditors to agree
  • Only those creditors who have received notice are bound by terms
  • Industry standard returns to creditors are 25% - 30% over 5 years

Bankruptcy

Court process where virtually all debts are included.  Once bankrupt, no further action can be brought by creditors.  All assets are sold and money paid to creditors.

 

Advantages Disadvantages
  • Closure on financial difficulties
  • Usually lasts only one year
  • Lower cost than IVA
  • Essential household furniture is protected
  • Restrictions from acting in certain capacities, e.g. company director, solicitor, accountant
  • Stigma of being bankrupt
  • Home is at risk
  • Income contributions for up to three years
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