Bankruptcy and the role of the TIB

Question 1

Pros/Cons of Individual Voluntary Arrangements

Answer 1

• The debtor is closely involved in the process.
• The restrictions of bankruptcy are avoided.
• The debtor avoids the stigma and disqualifications that follow bankruptcy.
• The overall costs are usually less than a formal bankruptcy.
• Will last 5 years and debtor will struggle to obtain credit during this period.

Question 2

Pros/Cons of a Debt Relief Order

Answer 2

• Lasts for twelve months.
• At the end of the period, the insolvent individual will be freed from the debts that
  were included in the order.
• Do not involve the courts.
• Only suitable for low income/low debt (must have less than £75 p.m. disposable income and owe less than £30,000).

Question 3

Pros/Cons of Deeds of arrangement

Answer 3

• Can be set up quickly and cheaply. They offer a good solution to a short-term problem.
• Not legally binding, so the creditors could ignore it at any time and seek to collect the full debt.

Question 4

Pros/Cons of Administration orders

Answer 4

• There is only one monthly payment to the court.
• The payment is based on the amount that the individual can afford.
• Once the order is in place, the creditors cannot take any action without first asking
  the court.
• If the individual misses a payment, the arrangement may fail.
• An administration order is registered in the Register of Judgments, Orders and Fines,
  which will affect the individual’s credit rating.
• An order can only be applied for if the debt owed is less than £5,000 and there is a CCJ.