Alternatives To Bankruptcy

Declaring bankruptcy is the most radical solution for your cumulated debt problems. It is accompanied with serious and long lasting consequences. For these reasons, your decision to proceed and to get involved in the full scale bankruptcy procedure should be based on carefully balanced previous thinking and consideration of all options available. This kind of decisions you do not make over night. In addition, bankruptcy intention is to be preceded with the number of alternatives with clear intention to prevent further financial meltdown as early as possible. Here are some of the most effective and widely recognized alternatives to the bankruptcy itself.

Administration Orders

The first option available for you to use in order to avoid bankruptcy is an administration order. With this alternative based on the county court order you are allowed to make one single cumulated payment every month which is to cover the sum of all debts at the moment. It is important to emphasize that you are making payment to the court instead directly to your creditors. Afterwards, the court is to make proportional payment to your creditors. Naturally, certain number of conditions have to be fulfilled in order for the administration order to be fully effective:

• The minimum number of debts 2
• The maximum amount of your debts less than £5,000
• The minimum number of county/high court judgments against you 1

The significance of this alternative to the bankruptcy is in its power to prevent your creditors from further actions without the previous allowance issued by the court. As expected you have to be regular and precise when it comes to your obligation to pay to the court. In case you are to be late or cancel your payments, then the creditors are free in your efforts to collect their debts individually.

IVA – Individual Voluntary Agreement
The next alternative which can postpone or prevent the bankruptcy is an individual voluntary arrangement or IVA. This alternative includes an agreement with legal consequences between you and your creditors. The essence of this agreement is the payment period no longer than 5 years during which you are to repay one part of your debts while the remaining part is to be written off at the end of the period previously accepted. It is worth mentioning that the decision whether or not to accept your suggestion for IVA is entirely upon your creditors. As expected they are making their decision according to the estimation which option will allow them to receive the most of their money through IVA or Bankruptcy. Again, it is expected from you to respect your obligations unless you want to face danger of going into bankruptcy.

DRO – Debt Relief Orders

A Debt Relief Order or DRO include the following conditions to be considered as an alternative to the bankruptcy:
• The amount of the unsecured debts is less than £15,000
• The amount of your available income is less than £50 per month
• The amount of your savings/assets/pension are less than £300
• You do not own a home
• You have not declared bankruptcy
• You do not use an IVA
• You did not have DRO in the period of the last 6 years
With DRO your creditors cannot approach you directly for payment issues. In addition, your debt will be written off after the period of 12 months. This alternative does not include the interference of the court.

Debt Management Plans

A Debt Management Plan can also be considered as an alternative for avoidance of the bankruptcy. In this type of solution for your financial problems you are trying to reach an agreement with your creditors with no legal obligations. However, you are obliged to respect what has been previously agreed with your regular monthly payments. As long as you can keep up with the new structure of your financial obligations your creditors will not use some other means to collect their money.

There Is (No) Solution

In conclusion we have to say that every one of the alternatives mentioned deserves your full consideration and analysis. You can choose according to your available financial resources and payment potential the alternative which is to suit you the best. On the other side, the alternative you choose should be really used for the purpose of finding the sustainable solution for your situation, and not for the purpose of buying some additional time and temporary avoidance of the inevitable bankruptcy. The number of available alternatives is actually the best proof of good will on both sides for finding the modus which will help in prevailing the financial troubles everyone of us faces from time to time in all forms. The last thing anyone wants to see is one more person facing the bankruptcy.

Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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