Duchess of York could choose an alternative to bankruptcy
The Duchess of York’s difficulties in coping with debt are an extreme example of problems faced by many people who seem set to suffer in the credit crunch. 
Soon, like more than 130,000 people last year, the Duchess may have to decide whether bankruptcy or a less drastic option known as an Individual Voluntary Arrangement (IVA) is the best way to deal with her debts.
While bankruptcy can wipe the slate clean and clear all obligations to pay debts within a year, this requires a court order and will impose several restrictions on the debtor. Rising numbers of people who cannot pay their debts are opting for IVAs which can avoid the need for a court order but take up to five years to clear debts.
Official figures from the Insolvency Service show the number of bankruptcies has more than trebled over the last decade while IVAs have become six times more widespread. Nearly 75,000 bankruptcy orders were granted last year compared to 21,550 in 2000 and there were 47,640 IVAs compared to fewer than 8,000 ten years ago.
During the second quarter of 2010, the number of bankruptcies fell by 18 per cent on the previous quarter to just under 15,000 orders, while IVAs increased by 14 per cent to 13,470.
Debtors should beware the illusion that it is possible to borrow your way out of debt; they should also avoid companies which charge fees for consolidating loans or bundling debts together. Free advice on how to cope can be obtained from the Debt Advice Trust on 0800 954 5518 or from your local Citizens Advice Bureau. The Bankruptcy Service and the Insolvency Helpline on 0800 074 6918 also provide free advice online and by telephone.
The correct solution will depend on a wide variety of individual and family factors. Here are some of the options people unable to cope with their debts should consider;
The advantages of a bankruptcy compared to an IVA.
A bankruptcy can be cleared after one year whereas an IVA can last up to five years.
A bankruptcy will write off all debts where as an IVA can only write of up to 75 per cent of debts.
Bankruptcy may be better for clients with no assets. Whereas an IVA may mean losing some or all equity in assets.
An IVA is not suitable for the unemployed, whereas bankruptcy can be considered for those not working.
An IVA is not suitable for those on income benefits, whereas bankruptcy can be considered for those on benefits.
Disadvantages of bankruptcy
You lose control of your assets and if you own your home you will have to sell it.
You cannot obtain credit for over £500 without the permission from the lender.
You cannot act as a company director.
You cannot take any part in the promotion, formation or management of a limited company without the permission of the court.
Your credit is affected for many years after you are discharged.
You may be publicly examined in court.
Perhaps that last factor will weigh most heavily in the minds of high profile debtors, such as the Duchess of York. But soaring bankruptcy and IVA numbers suggest that some social stigma must remain for those who fail to honour their debts.
August 12, 2010
Tags: Bankrupcy, borrowing, consolidate debt loans, Credit Crunch, IVA, sub prime loans Posted in: Uncategorized
3 Responses
That is because Bankruptcy law is complex, when you file bankruptcy, you need a bankruptcy law firm that deals with these issues on a daily basis. Ivas
After October 17, 2005, a lot of people are going to become interested in debt settlement as an alternative to bankruptcy. Debt Financing
That is because Bankruptcy law is complex, when you file bankruptcy, you need a bankruptcy law firm that deals with these issues on a daily basis. Debt Financing
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