What are the alternatives to bankruptcy?

If you’re considering bankruptcy but not sure if it’s the best way to manage your debts, don’t worry.

Choosing a debt solution can feel overwhelming, especially when there are several options available to you. It’s always good to take time to understand how each solution could affect you so that you’re confident that you’re making the right choice.

Other solutions that you might want to consider include:

Individual Voluntary Arrangement (IVA)

This insolvency solution is a legally binding agreement between you and your creditors.

You’ll make affordable monthly payments for an agreed amount of time, usually five to six years, and after this, any outstanding unsecured debts included in your plan will be written off.

Any assets you own will be protected, interest and charges will be frozen, and the creditors included in your IVA won’t be able to chase you for payments or take any legal action against you.

A Debt Management Plan (DMP)

This solution is an informal arrangement. In a DMP, you’ll pay back everything you owe until you’ve repaid everything you owe.

You’ll make an affordable monthly payment once you’ve paid all of your essential expenses.

Normally, your creditors will agree to freeze your interest and charges and reduce the amount of contact you receive from them, but as it’s an informal plan, they don’t have to.

A Debt Relief Order (DRO)

There are strict eligibility criteria for this insolvency solution.

An approved intermediary will submit your application on your behalf, and if it’s approved, your DRO will begin.

You won’t need to make any payments into your DRO, and after a year, any outstanding unsecured debts will be written off.

Talk or type, we’re here to help. Call us on 0800 316 1833 or complete our simple online form.

FAQs

What if my bankruptcy has ended but I have no proof?

You can ask the Insolvency Service for a free letter to prove you are no longer bankrupt. It is a good idea to keep this letter safe. You can show it to the people you owed money to if they ever ask you for payments in the future

How do I know my bankruptcy has ended?

If everything goes to plan, your bankruptcy will end automatically. You might not get a letter to tell you this has happened. If you are unsure, you can look at the public Insolvency Register online to get an idea of when it finishes.

Who informs my creditors of my bankruptcy?

Once approved for bankruptcy, you will stop dealing with the creditors included in your bankruptcy, and making payments, and they will be unable to take any legal action against you. You will be assigned a Trustee to contact the creditors during your bankruptcy on your behalf.

Can I continue to apply for credit while I am bankrupt?

It is illegal to apply for £500 or more of credit while you are bankrupt without informing the lender that you are bankrupt. In any case, most creditors would run a credit check on you and discover the note on your credit file, which lasts for six years following the date you filed for bankruptcy. We would, therefore, not recommend applying for credit until your file is clear as if you’re refused credit, this can have an additional negative effect on your credit rating.

Can I cancel bankruptcy?

You can cancel bankruptcy, which would lift the restrictions on you and the impact on your credit rating sooner, but you can only do this if one of the following reasons applies:

All of your debts and fees for your bankruptcy have been paid in full by either you or a third party.
You’ve set up an Individual Voluntary Arrangement (IVA) instead.
The bankruptcy was set up in error.