Fast Track Voluntary Arrangement vs Bankruptcy Timeline
When dealing with insurmountable debts, it can be difficult to see the light at the end of the tunnel. However, there are legal options available to you, such as Fast Track Voluntary Arrangements (FTVAs) and bankruptcy, both of which can provide a way out of your financial predicament. This blog post will provide an in-depth comparison of these two debt solutions under England and Wales bankruptcy law, aiming to help you make an informed decision about your financial future.
Fast Track Voluntary Arrangement (FTVA)
An FTVA is a form of Individual Voluntary Arrangement (IVA) that is specifically designed for individuals who are already in the process of bankruptcy. The Insolvency Service’s Official Receiver proposes this arrangement on your behalf.
Timeline and Process
The process of setting up an FTVA can be relatively quick, usually taking around six to eight weeks. It begins when the Official Receiver reviews your financial situation and decides that an FTVA would be more beneficial to your creditors than bankruptcy. They will then send a proposal to your creditors, who will have 28 days to raise any objections. If no objections are raised, or if more than 50% of creditors (by debt value) approve the proposal, the FTVA is put into place.
Advantages and Disadvantages
The primary advantage of an FTVA is that it allows you to avoid the stigma and certain legal restrictions associated with bankruptcy. In addition, unlike bankruptcy, an FTVA does not require you to sell your home or other assets to repay your debts. However, you will need to make regular payments towards your debts from your income for a period of typically 3 years.
Bankruptcy
Bankruptcy is a legal status where a person cannot repay their debts. It is usually seen as a last resort for people with severe debt problems.
Timeline and Process
The bankruptcy process takes longer than an FTVA. After you submit your bankruptcy application, it will be reviewed by an Adjudicator, who must make a decision within 28 days, although this can be extended by 14 days in some circumstances. If your application is accepted, your assets may be sold to repay your creditors, and you may be required to make payments from your income for up to 3 years.
Advantages and Disadvantages
Bankruptcy can provide a fresh start, as most debts are written off at the end of the bankruptcy period. However, it can have serious implications for your credit rating, and you may lose valuable assets, including your home. Additionally, certain professions bar bankrupt individuals from practicing.
Practical Tips
1. **Seek Professional Advice**: Before making a decision, it’s crucial to seek advice from a debt advisor or insolvency practitioner. They can help you understand the implications of both FTVAs and bankruptcy, and guide you towards the best solution for your situation.
2. **Consider Your Long-Term Goals**: Both options have long-term consequences. If keeping your home or maintaining your professional status is important, an FTVA may be preferable. If immediate debt relief is your main concern, bankruptcy might be the better option.
3. **Communicate with Your Creditors**: It’s often beneficial to maintain open lines of communication with your creditors. They may be willing to negotiate an informal repayment plan, which could help you avoid bankruptcy or an FTVA altogether.
Conclusion
Both FTVAs and bankruptcy offer a way out of debt, but they aren’t without their drawbacks. It’s essential to weigh up the pros and cons carefully and seek professional advice before deciding. Remember that while the situation may seem overwhelming now, these legal proceedings are designed to help you regain control of your finances and move towards a more stable financial future.