Guide to the Misconceptions of Insolvency
All too often people who would benefit greatly from the protection of bankruptcy dismiss the idea out of hand due to nothing more than misplaced fear caused by simple lack of knowledge of the facts.

In the worst cases IVA factories and their agents actively dissuade would-be bankruptcy candidates by deliberately lying about the facts. Simply put, unless you are protecting assets or equity the worst case scenario under the protection of bankruptcy is a 3 year income payments order. In the majority of cases even an income payments order would be for 50-70% of the balance of your disposable income after meeting you essential living expenses. This can generally be avoided with a correctly prepared income and expenditure account. The Official Receivers guidelines even allow provision for a holiday, something very rarely granted to those in an IVA!

Conversely IVA payments are for 5 years and very often squeeze people to the absolute maximum leaving them little or no money after expenses to live on.

It is a generally held misconception (actively encouraged by IVA factories) that bankruptcy is punitive and that bailiffs will seize your goods and chattels leaving you a chair, knife and fork and a change of clothes. This is completely and utterly false. You enter the protection of a bankruptcy order to do exactly that. To protect yourself from creditors, to allow you to wipe the slate clean and to get a fresh start. Under Section 283(2) of the insolvency act you are allowed to keep the tools of your trade, all clothing, bedding, furniture, household goods and even you car (provided it’s not too expensive). Actually even if they were to take your car they are duty bound to replace it with another vehicle capable of doing the same job. Try asking for that information from an IVA factory!

The law changed in 2004 and the mandatory period required to serve under the bankruptcy order was reduced from 3 years to 1 even if you have been bankrupt before. However, bankruptcy is no longer a punitive action and is there to allow discharged bankrupts the opportunity to rebuild their lives. In many cases, unless there is due reason to not to, many bankrupts can be discharcged from their bankruptcy in as little as 3 months. At the Official Receivers discretion then an early discharge is possible provided no creditors object. For those granted an early discharge, the average discharge period is around 7 months.

There is a further misconception held in this country that there exists a so called ‘credit black list’. This is again, quite untrue. In actuality every time you are extended a financial facility (credit card, overdraft, loan etc)a record is entered and your repayment performance agenised that facility is also recorded. When every you apply for a further facility, the prospective lender checks your credit performance record and decides on a case by case basis whether or not your meet their required lending criteria. Having been discharged from bankruptcy you will be judged, along with everyone else on your performance after you have been discharged. Granted it will take time, but provided that you act financially reasonably and don’t repeat the mistakes you made in the past, eventually you will be able to apply for all the normal facilities (bank accounts mortgages etc). There are many lenders and banking facility companies who specialise in provide in discharged bankrupts facilities along the way to allow them the chance to re-build their credit profile.

Another misconception encouraged by IVA factories is that entering into bankruptcy will destroy your credit profile for life. Actually the difference made to your credit profile by entering the protection of a bankruptcy order or an IVA is neglible. Both remain on your credit file for 6 years from the date of commencement. You will have ample opportunity to rebuild you credit profile under either insolvency solution.

In conclusion, those requiring either an IVA or the protection of a bankruptcy order are both insolvent. An IVA or indeed a bankruptcy are merely alternative solutions

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• What is Bankruptcy?
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