An individual voluntary arrangement (IVA) is a formal agreement which creates affordable payments to manage your debts over a set period usually of 5-6 years and at the end of an IVA, any unsecured debts left over are written off. If you run your own business you may be interested in a self employed IVA if you are struggling with debts. IVA’s are suitable debt management solutions for many individuals and business owners for a number of reasons:
IVAs are debt solutions for both employed and individuals in self-employment, so whatever your financial situation and your employment status, an arrangement like this may be the most suitable solution.
IVA’s are very possible solutions for self employed individuals just as much as employed individuals thanks to the fact that IVAs were created with businesses in mind. A Self-Employed IVA is a debt management solution which has been tailored specially to suit those of us who are self employed and struggling to stay on top of managing our debts.
They work in exactly the same way that IVAs work for employed individuals whereby interest and charges are frozen on unsecured debts and an agreement is made with your creditors to create affordable monthly payments to ensure that what is owed is paid back.
As with the regular IVA, the Self Employed IVA allows for any unsecured debts to be written off once the final payment is reached, as long as you have kept to the terms and conditions agreed to and written in the proposal. Not only this, you also have the bonus of working closely with an Insolvency Practitioner (IP) who helps you work out the amount that you can afford to pay back to your creditors per month.
To qualify for a Self Employed IVA, you must have a minimum of £5000 in unsecured debt arising from two or more creditors. You must also be a resident in England, Wales or Northern Ireland. The way in which an agreement is prepared for an individual running their own business as opposed to an employed individual differs very little. These IVAs are normally written to be more flexible accounting for aspects of a business that, for example, may only work from a seasonal income.
When an employed person is involved in an IVA, it is a requirement to obtain permission from the Insolvency Practitioner where credit of more than £500 is required during the term of the agreement. If, as a self employed individual and involved in an IVA, the use of ongoing business credit is required to successfully run the business, then this needs to be discussed with the creditors and pre-agreed upon within the proposal. It is likely that this will be accepted by the creditors, but it will have to meet criteria such as being paid within 30 days, or similar terms.
In some circumstances, a self-employed individual who has entered an IVA may need the ongoing supply of services from an unsecured creditor to ensure the business continues to function. However, including this creditor in an IVA may negatively impact the business relationship. In such situations, it may be possible to exempt certain trade creditors from the arrangement so that they still can receive continued payments towards their debts.
As with a regular IVA agreed upon by an employed individual, part of the agreement is to undergo an annual review for your self-employed Individual Voluntary Arrangement. The review involves yourself and your insolvency practitioner and allows for a re-evaluation for your financial situation to ensure that the payments agreed upon in the original proposal are still affordable for you.
Not only does it help re-view your agreement, it will also help make sure that you are heading in the right direction for future financial management. Factors that are taken into account during a review include things such as income, expenditure and the state of your current bills, looking at all in depth and ensuring that the agreement remains sustainable.
It is likely that your expenditure will change within a year of taking out the plan due to ever changing utility prices, insurance premiums and general living expenses. Therefore, an annual IVA review works in your favour, and is nothing to be nervous about. It is simply an assessment of your present financial circumstance with the view to adapt any changes to suit you.
Entering an IVA as a self-employed individual has its advantages and disadvantages. Benefits of this debt solution for people running their own business include factors such as:
Disadvantages may appear in the form of having to change bank accounts due to the operation on an overdraft or if you have a bank with unsecured debts. There is also the risk of creditors rejecting the need for business credit within the proposal.
A Self-Employed IVA is a straightforward, legally binding way to clear your debt. It allows you to take responsibility of your debts to the best of your ability and avoid bankruptcy or liquidation by paying them off over a fixed amount of time. It is a solution which offers peace of mind and sets you on a path for a more positive financial future.