One of the first things someone thinks of when they are in major debt and need to get out of debt as they can no longer afford to repay those debts is Bankruptcy. However, there are other options as well, such as an IVA/Individual Voluntary Arrangement, or possible a DRO/Debt Relief Order.

In fact, depending on your exact set of circumstances, you may not need to use these forms of insolvency, but you may be in a position to use another form of debt management.

No matter which form of insolvency or debt management option you choose, your credit will be affected. Your credit history has to be an accurate picture or portrayal or how you have paid your accounts, so anything outside of the contractual agreed payments, can affect your credit.

Bankruptcy and other forms of insolvency tend to be thought of as being very harsh. I’ll never get credit again, I’ll never be able to (insert anything here) again.

The fact is, this is not true.

Yes, Bankruptcy and other credit issues stay on your credit file for six (6) years, and your credit score will drop, but Bankruptcy or other credit issues does not have to be the end of the credit line.

Technically when you go bankrupt of enter into some other form of insolvency you are not to take out new credit. In the example of an IVA, which lasts for 5 years, you would not be able to take out new credit without the Insolvency Practitioner’s approval during the 5 year period.

In Bankruptcy and a DRO, these are usually discharged after 12 months.

In all these examples, after 12 months for Bankruptcy or a DRO, and 5 years in an IVA, you emerge debt free, getting a fresh start.

Yes, it may mean in the beginning time after you are discharged from Bankruptcy or a DRO you may not be able to be approved for credit. But there are ways to improve your credit score after discharge. Read here.

There are also bad credit loans, and many other ways to get approved for a loan after being bankrupt. Time is one of these ways to get a loan, you need patience and to wait.

So going bankrupt or being insolvent is not the end of the credit line, it is a way to give you a fresh start, and to relieve you of the stress of being in debt. But as always, you need professional advice as Bankruptcy and any other forms of insolvency or debt management, need to fully researched, and not entered into lightly.

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