So is a self employed IVA right for you? Well, anyone who is facing a mountain of bills with no way to repay them can quickly lose hope. Though it may seem like there is no end in sight to this negative situation, there actually is help available.
There are various debt solutions that consumers can take advantage of based on the type and level of their financial issues. One of them is designed for self-employed individuals, who often have difficulty finding financial assistance from traditional sources.
A self-employed IVA, or Individual Voluntary Arrangement, can help a person avoid bankruptcy and begin repairing credit.
What Is A Self Employed IVA?
This solution involves developing a formal arrangement with creditors to repay a percentage of debt during a fixed period. It is a more attractive solution than bankruptcy because it does not feature the same penalties or restrictions.
Individuals maintain more control over their finances, offering them hope of restoring their financial status to its previous state.
Creditors often prefer this arrangement to bankruptcy because it can provide a higher rate of return, require less time to arrange, and be more cost effective. Debt solution providers offer self employed IVAs at no charge to consumers.
The typical term of an IVA is five years and the arrangement can include all unsecured creditors. The individual must make regular payments for the agreed-upon term.
Once the IVA period is completed, the individual will have written off a significant amount of the debt. If business fluctuations make it impossible to afford the agreed upon payment amount, an IVA case officer can ask creditors to accept lower payments.
A self employed IVA is regularly reviewed after it has been arranged. If the individual becomes the owner of additional assets, these must be declared.
For example, an inheritance or lottery winnings should be paid into the IVA and distributed to creditors according to the agreement. Doing so is beneficial to the individual because it contributes to faster repayment, allowing the person to begin rebuilding his or her business and personal finances.
Who Is Eligible For A Self Employed IVA?
Being self employed has its benefits but easily obtaining financing is not usually one of them. This is especially true when an individual has financial issues.
As a solution for the self employed with a high level of debt, this IVA is offered to sole traders, partnerships, limited companies, buy-to-let landlords, and construction industry scheme workers.
To qualify, the individual must have an operating business, debt of at least £10,000, and be unable to immediately satisfy this debt.
Positive And Negative Aspects of Self Employed IVAs
Before consumers decide to move forward with a self employed IVA, they should explore all the debt solutions available to them. Debt counselors can help them with this, offering impartial advice that includes the pros and cons of each debt solution.
They explain each option in detail and how the decision to pursue a certain arrangement could affect the individual, the business, and the future financial status.
In the case of self employed IVAs, there are several benefits to be gained. Once the arrangement is made, charges and interest are frozen. As long as the terms of the IVA are met, unsecured creditors will not make further contact.
In addition, this arrangement is not published in local papers, offering the individual privacy during a difficult financial time. By making affordable payments, the financial position of the business is solidified and the individual can develop a strong financial management plan for the future.
Missing an IVA payment could result in failure of the IVA, leading interest and other charges that were previously placed on hold to be reapplied. Though the IVA is not publicly published, it does appear on the credit file of the individual.
This will most likely make it more difficult for the individual to obtain additional credit during the term of the IVA. However, most experts warn people with IVAs against applying for more credit. These individuals should be focusing on making the IVA payments, not assuming more debt.
Comparing A Self Employed IVA To Bankruptcy
Filing for bankruptcy can significantly affect the future plans of the business owner. The bank accounts may be frozen and the business assets may be sold. Any existing finance agreements could be terminated and credit will be subject to a £500 limit.
In addition, the individual will not be permitted to serve as a director of a limited company. This could require some people to step down from their current position within their business.
With a self employed IVA, the business can continue trading as if no changes occurred. Existing finance arrangements will remain intact and the business owner may retain all business assets.
The entrepreneur retains more control over finances through a structured IVA payment plan. A low level of publicity means that few, if any, business associates will become aware of the situation. This decreases the chances of lost business due to financial status of the owner.
The Self Employed IVA Application Process
The process of applying for a self employed IVA usually begins with a discussion with a debt solution specialist. If the individual is still interested in the IVA, a debt counseling session regarding this option typically follows.
This may involve an in-person meeting with a debt counselor to cover various ways of resolving debt and assess the viability of the business. The counselor reviews the debts of the business as well as the income, assets, creditors, and expenses.
A one-year cash flow projection is then developed, illustrating the viability of the business to creditors. The business owner can use this document as an annual budget.
Once the IVA has been arranged, a team of case officers is assigned to the individual. These experts serve as a point of contact for questions and issues.
They are available throughout the term of the IVA agreement. If business fluctuations require modification to the self employed IVA, a case officer will work directly with creditors regarding payment adjustment.
This allows the individual to continue under this arrangement without the need to explore other options.