It can happen with everyone that problems occur that are difficult to handle. A common problem is related to debt. Debt problems have to be taken serious, because they can even ruin our lives. It may be difficult to imagine how debt can affect our life, but there are situations when we get to the bottom of the hole. For example, if we lose our job or our house burns down we will not be able to pay the debts we have. If we don’t pay our debts, loaners will take our home or they will prosecute us. When we are talking about debt, we have to be serious.

There are two solutions to the most difficult situations. One is an IVA and the other is bankruptcy. IVAs are legally binding arrangements with the creditors that result in cutting the interest and lowering the debt to a sum that can be paid in five years. Bankruptcy is a bit more severe solution. It means that the borrower cannot pay the debts anymore and has to file bankruptcy. This method makes the borrower debt free, but it has its downsides.

When we have to choose between these two, probably bankruptcy will be easier. This method is simple, because you have to meet only a few conditions in order to file bankruptcy. When you are in real big trouble with your payments, like if you lost your job, you simply use this method. Declaring bankruptcy helps you to get rid of your debts in a short time. An individual voluntary arrangement (IVA), however, has more conditions to meet. You have to have more creditors and debt over 15000 pounds, and in this case, you have to have a stable income in order to be able to pay the monthly amount for five years.

If we look at the disadvantages of these solutions, we will see that both of them leave a mark on our credit record. Bankruptcy stays on the record for ten years, but after ten years, it’s wiped out, so we can start all over. An IVA leaves a mark, too, but this mark will stay on the record only for those five years while we have to pay it. We cannot do anything to avoid this.  When things get very bad, one of these solutions may have to be used.

The security of these methods is pretty good. An IVA is legally binding, so the creditors cannot do anything to make you pay more. Bankruptcy is also a legal method, but in this case, the creditors are able to make some extra charges.

These methods have to be chosen carefully and only used in the worst case.