Bankruptcy or IVA - The Procedure
Below is a MRR and PLR article in category Finance -> subcategory Debt Consolidation.
Bankruptcy or IVA: Understanding the Procedures
When facing financial difficulties, two effective solutions are the Individual Voluntary Arrangement (IVA) and Bankruptcy. Here's a clearer look at the procedures involved in both options.
Individual Voluntary Arrangement (IVA)
Initial Steps
The first step in considering an IVA is meeting with an Insolvency Practitioner (IP). This can be done in person or over the phone. The IP will assess whether an IVA is suitable and may suggest alternative options.Gathering Information
If an IVA is appropriate, the IP will collect detailed financial information from the debtor. This includes household expenditures, asset details, and creditor information.Verification and Proposal Drafting
The IP must verify all details provided. Once verified, the IP drafts proposals aiming to balance the interests of both the debtor and creditors. The proposal outlines the maximum amount the debtor can repay, encouraging creditors to accept the terms.Approval Process
After reviewing and signing the proposal, it is sent to creditors who have 2-3 weeks to consider it. Creditors can accept, reject, or suggest modifications.A meeting is then scheduled for the final vote, though this is more of a deadline than a physical gathering, as decisions are often sent electronically.
Conclusion
For an IVA to be approved, 75% of the debt value must agree to the terms. If accepted, the IP sends a chairperson's report to the creditors and the court confirming the acceptance.Petitioning for Bankruptcy
Initiating the Process
Petitioning for bankruptcy can seem daunting but is straightforward. You need to complete forms 6.27 and 6.28, available online from the court's website. It's advisable to check with the court if an appointment is necessary.At the Court
Typically held at the High Court in London, petitioners arrive early and inform a desk clerk of their intent. The clerk reviews the forms and issues a bankruptcy order, directing the petitioner to pay the required fee.Post-Petition Steps
After receiving the bankruptcy order, the petitioner visits the Official Receiver's office. There, they are informed about the next steps of the process.Follow-Up
An appointment with the Official Receiver is scheduled, often as a telephone appointment within two weeks. Sometimes a follow-up in-office meeting is needed, but this will be clarified during the process.Duration
Bankruptcy usually lasts one year, though discharge may occur sooner or later, depending on any restrictions.---
This simplified overview outlines what to expect when choosing between an IVA or Bankruptcy. It's a starting point for understanding the procedures involved in managing financial difficulties.
You can find the original non-AI version of this article here: Bankruptcy or IVA - The Procedure.
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