An self-employed IVA (Individual Voluntary Arrangement) is a legal agreement among you and your lenders. It helps you maintain a strategic distance from liquidation by taking care of part of your debt over a fixed time frame. Towards the end of the period (generally around five to six years) and following your scheduled payments, your creditors will agree to write off the outstanding balance of your debt without collateral.
When you’re self-employed, this sort of game plan is a successful option in contrast to bankruptcy. It’s simpler for you to keep on trading, without the limitations forced by insolvency just as holding your assets.
You make regular scheduled payments to an Insolvency Practitioner (IP) who will at that point make payments to your creditors. You could be without debt in as early as 5 years, with a lot of your business and individual debt written off. There’ll be no more threats of legal action against you.
You should still follow a spending plan, however your business and individual debts will all be dealt with – and would still have enough cash left over to maintain your home and business, purchase clothes and food for you and your family, and stay up with your outflows.
- You can continue exchanging, utilizing providers and lines of credit
- You can hold on to tools, hardware and stock that you need for your business
- You can structure payments to suit your income
- Interest and charges will be frozen
- Payment is recurring monthly for just once
- Set up fees are included on your monthly scheduled payment
- No legal actions allowed from creditors
- Your business assets are ensured
- Your home will be safe
- An IVA is anything but difficult to set up with the help of your IP
- You’d pay back less than the amount owed
- Your name will be put on the Insolvency Register
- IVAs normally keep going for somewhere in the range of five and six years
- You won’t have the option to utilize store or credit cards
- You will most likely need to open another bank account that isn’t connected to your business
- You may need to remortgage your home if there is value in it
- Just unsecured debts can be included
- Possibility of bankruptcy in the event that you neglect to keep up your recurring payment
- Just accessible if you live in England, Wales or Northern Ireland
Self-employed IVAs are similar to a regular IVA, but there are differences between the two, such as:
- Flexibility – a self-employed IVA looks more at your individual circumstances. For example, if your business income is seasonal, then your monthly IVA payments can be flexed to allow you to vary your payment amount each month, as long as you contribute the agreed total amount over the course of each 12 month period
- Treating creditors differently – Usually, in a normal IVA, all your creditors are included and treated in the same way. That means they receive a dividend from the IVA in full and final settlement, and write off the remainder of your debt at the end of the IVA. However, with a self-employed IVA, you can prioritise certain creditors if you need to keep paying them in full in order to continue trading
- Cash-flows – In a self-employed IVA, it is important to include a projected cash-flow for the next 12 months so your creditors can see that the arrangement is sustainable. There is no such requirement in a normal IVA
- No further credit – In a normal IVA, you can’t usually obtain further credit of more than £500 without the permission of the IVA Supervisor. In a self-employed IVA, it is more likely that you will be allowed to take out further credit, as long as you can afford the repayments and you need the credit to run a viable business
This would be applicable for self-employed people who want to settle their debts. With Getting out of Debt UK, we’ll help you determine if the self-employed IVA is best for you and your business, and you’d still avoid economic challenges. Contact us today to arrange a free consultation.