The misery of debt is known to many of us. In most circumstances, we plough through debt, able to pay creditors in time but used to forgoing expensive items in a concerted effort to become solvent. Yet for some individuals circumstances may have prevailed to make debt so substantial that they are simply unable to meet demands for repayment. In these circumstances an individual may find it necessary to discuss their financial problems with a personal bankruptcy solicitor most of whom will also deal with an IVA (Individual Voluntary Arrangement).
A personal bankruptcy solicitor will assist in either helping an individual to apply or will take action against a third party by making an application on behalf of a creditor. Making someone or a partnership bankrupt is usually the decision of that person or the organisation themselves which acts to help debt resolution by dividing non-exempt assets among creditors, discharging financial commitments after this division and protecting the bankrupt from further action by creditors. It provides a fresh start to the debtor, and, if it is not requested by the debtor themselves, it may be requested by creditors who see it as an opportunity for at least some repayment.
In the United Kingdom a personal bankruptcy solicitor can only make individuals and partnerships bankrupt, although the term is commonly but incorrectly used to refer to insolvency among businesses too. In recent years, legal change has made the active period shorter, and it will not generally exceed one year. This liberalisation has prompted an increase in the number of applications in recent years, with 11,195 in the second quarter of 2005: a 27.5% increase on the second quarter of 2004.
Substantial growth in the number of Individual Voluntary Agreements (IVAs) has also been evident. IVAs are a formal process through which individuals may avoid bankruptcy. Created by the Insolvency Act 1986, IVAs represent a proposal of repayments which is offered to debtor’s creditors through an Insolvency Practitioner. Creditors meet and vote on whether to accept the IVA, and a 75% majority is required for it to be approved. IVAs are a means for those in substantial debt to avoid bankruptcy, and specialist debt organisations exist to help guide people through the necessary processes to achieve this goal.
If you are in substantial debt, it would be worthwhile installing an IVA before you become bankrupt, but it is also possible to establish one after you have been made bankrupt. If you do establish one after you have been made bankrupt, it is possible to have your bankruptcy annulled through a formal application to the courts. When an IVA is set up after bankruptcy, the Official Receiver can oversee the arrangement, although this ‘Fast Track Voluntary Arrangement’ can be restrictive and have been unpopular so far.
In the future it is plausible that the use of IVAs will grow. Indeed, legislation has been proposed to establish ‘Simple’ IVAs which would enable debtors with lower levels of debt to obtain the protection offered by the standard IVA presently. This would see IVAs become not only a means of avoiding bankruptcy, but also a positive way for debt to be tackled by individuals with varying financial difficulty.