IVA for Self Employed

A debt solution may not be suitable in all circumstances. Fees may apply and will affect your credit rating

Operating a self employed business is stressful especially if you have debt problems

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If your business is struggling with unmanageable debts, it’s vital you are able to work with a practice that will be honest about what is achievable and then hopefully exceed your expectations. Feedback from clients can be read in our case studies section and we have excellent reviews on Trustpilot.

We employ a team of 25 people from our offices in Lloyd Street in Manchester, many of whom have been with and built their careers with us over a long period of time.

The team at The Debt Advisor and The Business Debt Advisor is ready to help you.

At The Business Debt Advisor, the initial consultation is free and there is no need to worry about the cost. Our advisors will ask you questions about the specifics of your business problems so that we can find a solution. We can accurately quote a fees package at this stage.

We will deliver our plan of action which you can then discuss with your colleagues, family or fellow directors. There is no commitment to use our services.

We have dealt with sole traders to large companies across a wide range of business sectors.

Debts can accumulate for a range of reasons; bad debts, lost contracts, or just poor financial control. The debts may be a combination of business and personal, as personal loans and credit card debts are often accrued trying to support the business.

Voluntary Arrangements can be used in a number of ways which are explained below:

Arrangements based on contributions

The most common IVA if you are self employed involves retaining your business assets while offering to pay monthly contributions out of future earnings over a fixed period of time, usually 5 years. Where there is a personal property with equity, creditors will expect that a sum is introduced at the end of the arrangement in place of a share of your equity.

Partners can propose interlocking IVA’s which essentially provides for the partners to make one monthly contribution to settle all debts irrespective of whether the debts are in partner’s name or owed jointly. Please see Voluntary Arrangements for Partnerships.

Arrangements based on a full and final Settlement

Generally, these types of arrangements offer creditors a lump sum to settle their debts. The lump sum could be a 3rd party sum or sums raised from the sale of a property (as detailed below) or funds from the sale of assets not needed by your business. Creditors are only likely to accept a full and final if they are satisfied you are not able to pay monthly contributions as well.

Is an IVA suitable for me?

An IVA could be appropriate for you if you are struggling to meet business debts and possibly personal debts as well. The most compelling benefit of an IVA is that you pay monthly affordable payments for a 5 or 6 year period with the unpaid balance being written off when the IVA is successfully completed.

The starting point for working out whether an IVA is appropriate if you are self-employed, is working out if your business is freed from historic debt, can trade viably on a cash positive basis and afford to make a monthly contribution to your business and personal debt.

Examples of unsecured creditors whose debt can be included in an IVA are:-

  • Credit cards and loans
  • Debts owed by you and someone else “jointly owed”
  • Monies owed to individuals including friends and family
  • Debts due to HMR & C including overpaid benefits, self assessment tax, VAT
  • Arrears of council tax and utilities
  • Trade creditors who supply you if you trade as self employed
  • Shortfall once a property has been repossessed

The debts that cannot be included in an IVA include:-

  • Matrimonial debt – monies owed to an ex-husband or wife which a court has decided should be paid
  • Student debt
  • Court fines or fines for traffic violations

Can an IVA stop action by creditors?

Yes but it depends on the action and how far it is has gone. We can apply for an “interim order” which prevents creditors from starting or continuing action against you. This includes writs, judgments, charging orders, liability orders and petitions for bankruptcy. It is vital if you are facing action to get in touch immediately. If you leave it too late, we might not have enough time to help you obtain an interim order before the debt becomes charged on your property or you end up bankrupt.

If you are made bankrupt and you have assets that are risk of being sold by your Trustee in Bankruptcy, it is possible to propose an IVA and if this is agreed by your creditors, your bankruptcy can be cancelled. You will need specialist advice on whether this is possible.

IVA – the Benefits and Risks

Finding the right solution is only possible if a clear picture is available of the short-term and long-term benefits and risks of an Individual Voluntary Arrangement. An IVA is aimed at getting your unsecured debts paid off in a manner that is affordable but it is a formal and legally binding solution. An IVA is not easy and requires discipline and we have detailed below both the short term and long term benefits and risks.

The Benefits

  • Unsecured debts remaining after an IVA is successfully completed are written off.
  • An IVA can protect your residential property, but refinancing in year IVA will have to be considered.
  • You can exclude business assets if they are needed to facilitate future trading.
  • An IVA prevents creditors from taking action or continuing from adding further interest or charges to their debt.
  • The payment terms can allow payment breaks and extend the arrangement if there are missed payments but creditors would have to agree these terms.

The Risks

  • If you cannot keep to the terms of the IVA, your IVA could fail when you become liable for the balance owed to your creditors including any interest accrued. You could also end up bankrupt.
  • Creditors can put forward modifications that are likely to ensure efforts are made to introduce equity in property or surplus assets are sold and the funds are introduced.
  • Creditors could refuse to extend credit to your business post approval of the IVA.
  • An IVA requires creditors to vote on whether to accept, alter or reject the arrangement and any debts incurred after the date of approval cannot be included in the solution
  • An IVA means you have to live within an agreed budget for the period of the IVA and you cannot take on new credit without your Supervisor’s consent.
  • Any debt excluded from the IVA will remain outstanding.
  • Your credit rating will be affected for 6 years and details of your arrangement are added to the insolvency register.

The Business Debt Advisor is regulated by The Financial Conduct Authority. This means we are able to offer advice and deliver both formal and informal solutions. IVA’s do need to be carefully considered and you must take independent advice.  Your credit rating will be affected for up to 6 years after the IVA is approved. We hope that the information on this site including Frequently Asked Questions, will help inform you.

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Client Story

Shirley and her husband were involved as partners in the purchase of a potential development with another couple. Unfortunately part way through the development the relationship between the 2 couples broke down and Shirley and her husband decided to exit the deal and hand over their share to the other party. This resulted in action taken against Shirley’s husband and he chose to petition for Bankruptcy. At the time no action was taken against Shirley. However, some years later the other party issued a writ against Shirley and entered into a Deed of compromise to repay of £57,000 the debt by monthly repayments. Shirley’s sought advice from The Business Debt Advisor team on Shirley’s behalf. Shirley’s health had been seriously effected by a bout of cancer and the stress of the debt was effecting her recovery. As Shirley and her husband lived in rented accommodation and had minimal assets, it was clear that bankruptcy was really the only sensible option. The Business Debt Advisor team helped Shirley pull together financial information on her assets which were minimal plus her debts and income and expenditure. We helped her complete her bankruptcy application online and her husband who was still working, helped out with the application fee of £680. Within days Shirley was bankrupt and her experience of dealing with the Official Receiver was very positive. They agreed with her that she would affordable pay income contributions of £210 per month for a 3 year period.