Recent figures from the Insolvency Service show that bankruptcies and DROs are falling in the UK, however there is an increase in people entering an IVA to resolve debt problems.
Both bankruptcies, and the £90 Debt Relief Order route into bankruptcy dropped compared to the same period last year. The first 3 months of 2013 saw 6,673 enter bankruptcy because of unsecured debts. During the same period of 2014 the number of bankruptcy orders was 5,671.
IVA over a Bankruptcy
While the number of people wishing to enter bankruptcy is declining, the number of people entering an IVA is increasing. The number of people entering an IVA in the first 3 month's of 2013 was 11,124 and this became 12,711 over the first three month's of 2014.
The IVA is proving a more popular route over the bankruptcy. There are pros and cons to entering a bankruptcy instead of an IVA, such as,
- Bankruptcy only lasts 1 year but an IVA is 5 years. In bankruptcy you could be asked to pay for 3 years towards your debt in an Income Payment Order / Arrangement.
- The IVA and the bankruptcy would create a 6 year default on your credit file.
- You don't have to pay monthly into a bankruptcy if you don't have the disposable income or your income is only state benefits.
Before you decide to enter bankruptcy or an IVA you should check some information to ensure it won't affect your situation.
- Work: Some contracts of employment won't allow you to enter an IVA or bankruptcy.
- Bank account: If you owe money to a bank or building society and your day to day banking is through this company then you will need a fresh bank account with a bank that you don't owe money to.