IVA or bankruptcy is the first thing to consider if you’re thinking about getting debt-free, to help you out we’ve weighed up the main pros and cons below:
Pros of an IVA:
- You only must pay an agreed percentage of your debt back
- You will be completely free of debt in a set period
- Your insolvency practitioner will deal with your creditors for you
- You will not have to sell your home
- It’s affordable and the plan is tailored to you
- Charges and interest on your debts will be frozen
Cons:
- Although the acceptance rate for an IVA is very high, your creditors must still agree on it
- You will be on a tight budget whilst the debt is being repaid
- It will affect your credit score but once it’s over, it allows you to rebuild it
- You will be listed on the Individual Insolvency Service register
Bankruptcy Pros:
- It is a very quick process, usually 3-6 months
- You’re allowed to keep certain items such as your household goods, and you’ll also keep a realistic amount of money to live on
- If you rent your home, you will not be forced to move
Bankruptcy Cons:
- It costs around £700 to start the process
- If you’re on a high income, you will be expected to continue to pay your debt for 3 years so you will not automatically be debt-free
- You’ll find it difficult to get credit while you’re bankrupt and after the process is finished
- Your credit rating will be negatively impacted for 6 years
- You may be forced to sell your home and other possessions