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What are the Alternatives to Bankruptcy?

If you are currently struggling with your finances then you may feel you have no choice but to declare yourself bankrupt. However, it is often in both yours and your creditors interests to avoid this and opt for one of the many alternatives.

Debt Relief Orders

A debt relief order is only suitable for those who do not own their own home and have minimal income as well as less than £15,000 of debt. You also be required to have assets of less then £300. A debt relief order will last for 12 months and during this time those creditors involved are forbidden from taking any action against you without consent from the Court. Should your circumstances still be the same when the time frame has been reached then the debts that were part of the debt relief order will be written off.

In order to qualify you must also be living or have lived within the last 3 years, in England or Wales. You will not be offered a Debt Relief Order if you have had another order or formal debt relief procedure when you apply.

Individual Voluntary Arrangements (IVA)

An IVA is a formal proposal to your creditors in which you offer to repay either all or part of your current debts. In order for your creditors to accept this they must agree in a vote of over 75% in favour.

You may still propose to enter into an IVA after being declared bankrupt. An IVA will normally last for between three and five years and after this your IVA will be declared successful. It is important to remember that if you do not maintain payments then this could lead to the failure of your IVA and often bankruptcy.

Administration orders

Should one or more of your creditors obtain a court judgment against you, then the County Court could make an Administration Order. With this course of action you will be expected to make regular payments to the court to pay the debt to your creditors providing you have enough income to do so. To qualify for this you must have debts of no more than £5,000. Failure to maintain regular payments will result in the Administration Order being cancelled.