Through the years there has always been a social stigma associated with a person being declared bankrupt. A lot of people, especially older people, see it as a major financial failure. They believe that the bankruptcy has come about because of somebody’s bad spending habits, by them not managing their money particularly well and generally being poor with money. In many situations this is the case, however time when people fall into debt because of reasons outside their control such as an emergency or redundancy.
A good bankruptcy alternative is to take out an IVA. This is an arrangement bound by law between a debtor and their creditors, and during this they repay a set amount for a certain agreed period of time, usually 5 years. They only repay what they can actually afford, and usually ends up being a lot less than the total amount that they owed. This still means that when the agreed time period is up, the creditors consider the debt paid fully.
But as with bankruptcy is there such a social stigma attached to an IVA?
To a certain extent there is. There are many people who would still see this as a financial failure. Would you really want to be getting IVA advice from your friends in the pub? It still means that somebody taking out an IVA has got themselves into more debt than they can handle. However an IVA is different to a bankruptcy because it will not be printed in the local press. It means that an IVA can be kept private apart from your creditors and yourself, which can be an immense weight lifted.
A lot of the social stigma is surrounding the perception that bankruptcy is “running away from your debts”. Bankruptcy means your debts will not get paid because you have no means with which to pay them. An IVA means that rather than getting swamped in the debt, the debtor pays back the maximum they can afford, and while less will be paid back they are still paying some.
Debt has always been a taboo subject. An IVA has much less of a social stigma than bankruptcy does, it is a bit of a difficult topic in general for us to talk about!
James Robinson is an expert in ivas and financial matters
categories: debt management,iva,debt,money,finance,lifestyle