Question

Hi, can you answer this question in more detail?

Subject: Hong Kong Personal Financial Planning Practice

Q2. A

When people are heavily in debt, they could consider filing for Bankruptcy or Individual voluntary arrangement (IVA). Elaborate the impacts of these two arrangements on the debtors’ daily lives.   

(Words: 600 - Don't direct copy)

Answer 1

The impacts of the two arrangements are as follows:

First we shall dicuss the impact of the case when the borrower files for bankruptcy

1. The major impact is the reputational loss for the borrower. Because he has been declared bankrupt it is very insulting thing that one can go thorugh.

2. When the person is declared as bankrupt sometimes the personal properties are also attached in the insolvency process and thus when these properties are auctioned it is a very upsetting condition.

3. The person has lost his faith forever from investors as the fact is that his business shall never be trusted again by the stakeholders.

4. He will not get any funding easily for any of his new projects even if they have high viability.

5. The Person looses self confidence and also might get depressed from the fact that things might not turn out his way in future also.

Now the impact of individual voluntary arrangement shall be as follows:

1. It doesn't affect the continuity of the business but the current creditors will restrain from giving anything on credit.

2. The person shall loose his credibility in the market and thus will have huge difficulty in arranging funds in future.

3. Sometimes the voluntary settlement means the issuance of shares in place of debt thus this can dilute the control over the firm.