iva debt relief
the self employed iva solution
Self Employed IVA
The numbers of self employed people entering into Individual Voluntary Arrangements (IVA) reach a record high by the end of 2006.
The governments IVA legislation, introduced in 1986, was brought in specifically to help the self employed and other small businesses restructure overwhelming debts, without having to take the drastic step of having to apply for bankruptcy.
There are now more than four million self employed people working in the UK. This very significant section of the community suffers the double disadvantage of trying to run both business and personal finances at the same time. Often these business and personal financial structures merge together and many self employed people suffer from major debt problems.
For those self employed people finding themselves with significant debt and cash flow problems the first step should be to approach their accountant to discuss all the available refinancing options which may be available.
Whether an accountant is used or not, the basic business options are reasonably straightforward for all small businesses - :
- Determine what business costs can be cut so that only the bare essentials for business survival remain.
- Seek out new marketing opportunities to promote the business and gain additional business revenue.
- Talk to the business bankers about possibly extending lines of credit or refinancing existing borrowings over a longer period.
If the refinancing and marketing options are not possible then a self employed businessman may need to look at a fundamental debt restructure along the following lines - :
Release of equity in property; assuming the debtor is a homeowner with sufficient equity to satisfy creditors.
A new debt consolidation loan, to reduce the overall monthly debt repayments; usually achieved by extending the repayments over a longer period.
A renegotiation of credit terms with each individual creditor. Often called Debt Management Plans (DMP) this type of arrangement is generally unlikely to work with very aggressive creditors who will continue to take legal debt recovery action. Moreover, HM Revenue and Customs also tend to dislike DMP because of the informal nature of the arrangement.
In a small but significant number of debt cases, a self employed IVA may be the most appropriate solution. An IVA will automatically involve all the self employed debtors’ creditors including HM Customs and Revenue subject to agreement. An IVA will only be appropriate where the self employed individual has at least £15,000, and often in excess of £20,000, of unsecured debts. For additional information or IVA advice please give us a call in complete confidence.
In the face of overwhelming debts, and without any real prospect of the creditors being repaid, the self employed debtor may need to apply for a personal bankruptcy. Unfortunately an increasing number of people have to take this drastic course of action where there is no possibility of saving the business.
Of course if you are a small home run business and you have been using your house as collateral for a business loan then you may find yourself in trouble with mortgage repayments. You should consider what happens with IVA house repossessions as it is not as bad as expected.