Running your own business comes with its ups and downs. As a self-employed individual, you may be worried about how mounting debt can impact your business and what options are available to you. Fortunately you can still find relief through an Individual Voluntary Arrangement (IVA), specifically tailored for self-employed individuals.
Understanding the Self-Employed IVA Process
If you’re a sole trader or part of a partnership, you may breathe a sigh of relief knowing that you could be eligible for a self-employed IVA. This debt solution allows you to include both personal debts and business-related debts incurred as a sole trader. By choosing an IVA, you demonstrate your commitment to repaying creditors, ensuring they receive more than they would through bankruptcy. Ultimately, any remaining debt will be written off, offering you a fresh start.
Designed for Struggling Businesses in the Modern Era
Originally conceived with self-employed individuals in mind, IVAs continue to serve as a lifeline for businesses facing financial hardship. In 2023, the focus remains on helping struggling self employed businesses regain control without resorting to individual bankruptcy. This second chance allows sole trader businesses to rise above their difficulties and thrive once more.
Consulting with Debt Movement for Self-Employed IVAs
If you’re considering a self-employed IVA, it’s crucial to fully comprehend the process and its implications for your business operations. Each situation is unique, and that’s where the Debt Movement team comes in. Our experts are here to guide you, providing a thorough understanding of the process and helping you determine whether an IVA is the right solution for you.
Tailored Solutions for Various Needs
Self-employed IVAs cater to a wide range of requirements. Whether you’re starting a new IVA while being self-employed or transitioning from an existing IVA to self-employment, we have you covered. Reach out to Debt Movement to gain a deeper understanding of IVAs and have all your questions answered.
Flexible Payment Methods for Self-Employed IVAs
As a self-employed individual, your income fluctuates month to month, making it challenging to estimate regular payments. Understanding your business and its cash flow is essential for setting up affordable payments throughout the year. Your Insolvency Practitioner (IP) will work with you to assess contribution-based arrangements or lump sum settlement-based arrangements based on your circumstances.
More Flexibility for Borrowing as a Self-Employed Individual
One common concern with IVAs is the restrictions they impose on borrowing and credit applications. However self-employed IVAs offer some flexibility. While borrowing over £500 still requires discussion with your IP, you may be able to maintain certain lines of business-related credit, allowing you to continue trading as usual.
Starting a Business While in an IVA
There are no strict rules against starting a new business while in an IVA. However, it’s crucial to make financially sound decisions. If your new business requires financial investment, discuss it with your IP. Keep in mind that your ability to borrow money and your credit rating will be restricted, so it may be wise to delay new business plans until after completing your IVA and rebuilding your credit score.
Protecting Assets in a Self-Employed
One of the advantages of opting for an IVA over bankruptcy as a sole trader is the ability to retain your assets. In most cases, your home and the majority of your assets remain protected. However, there are exceptions. If you possess a valuable non-essential asset, such as a high-end vehicle, you may be required to downgrade it to contribute funds towards your IVA. Remember, the success of your IVA relies on the viability of your business, so essential assets necessary for its operation, like tools, should be excluded from the IVA agreement.
Similar to a standard IVA, if you have more than £5,000 in equity in your home, you may be asked to remortgage and use a portion of that equity to pay into your IVA or extend the payment term. The advantage of an IVA is that you won’t be forced to sell your home to repay creditors, offering you greater stability.
Repaying Debt in a Self-Employed IVA
Contribution-based repayments are typically the preferred method for self-employed IVAs. Your payments will be based on your cash flow statements, ensuring they align with your fluctuating income. This flexibility allows you to make reasonable payments throughout the IVA term.
Furthermore, full and final settlements can be proposed to creditors, offering to pay off a portion of your debt while writing off the remaining balance. This option is particularly suitable if you have assets that can be sold to generate a lump sum. Creditors have the choice to accept or reject the offer, but they will consider all reasonable proposals.
Credit Score Implications of a Self-Employed IVA
Undertaking a self-employed IVA will have an impact on your credit score, as it remains on your credit record for six years. However, once that time has passed, you can begin rebuilding your credit rating.
If you’re a self-employed individual contemplating an IVA to address your problem debt, reach out to Debt Movement today. Our dedicated team is here to assist you in embarking on your journey towards financial freedom in 2023 and beyond.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
