What is a self-employed IVA?
A self-employed IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your creditors. It helps you avoid bankruptcy by paying off part of your debt over a fixed period of time. At the end of the period (usually around five to six years) and providing you keep to your agreed repayment schedule, your creditors will agree to write off the outstanding balance of your unsecured debt.
When you’re self-employed, this kind of arrangement is an effective alternative to bankruptcy. It’s easier for you to continue to trade, without the restrictions imposed by bankruptcy as well as retain your assets.
You make one affordable monthly payment to an Insolvency Practitioner (IP) who will then make payments to your creditors. You could be debt-free in as little as 5 years, with a significant amount of your business and personal debt written off. There’ll be no more threats of legal action, no more chasing from your creditors and no interest added.
You will need to keep to a budget, but your business and personal debts will all be taken care of – and you’ll still have enough money left over to run your home and business, buy clothes and food for you and your family, and keep up to date with all your essential outgoings.
How do I apply for a self-employed IVA?
Your IP will help you put together a forward-looking business cash-flow for the next twelve months, projecting the income and expenditure of the business.
This will show your creditors that the business is profitable and you are able to make reduced monthly payments to them. Your monthly income from the business after tax will then be used to pay your personal living costs, with the amount left over being the amount of money that you can afford to pay the IVA each month.
These payments can be flexible, taking into account any seasonal fluctuations in income. For example, if you’re a gardener and receive most of your income in the summer months and not as much in the winter months, then you can make payments to your IVA as and when you receive your income, providing you pay in the agreed amount over the course of a year.
- You can keep trading, using suppliers and lines of credit
- You can hold on to any tools, machinery and stock that you need for your business
- You can structure repayments to suit your cash flow
- Interest and charges will be frozen
- You make a single monthly payment
- Set up fees are included in your monthly payment
- No legal action
- Your business assets are protected
- Your home will be safe
- An IVA is easy to set up with the support of your IP
- You will usually pay back less than the full amount you owe
- Your arrangement will be on your credit file for six years and can affect your ability to get further credit
- Your name will be included on the Insolvency Register
- IVAs usually last for between five and six years
- You won’t be able to use store or credit cards
- You will probably need to open a new bank account that isn’t linked to your business
- You may need to remortgage your house if there is equity in it
- Only unsecured debts can be included
- Risk of bankruptcy if you fail to keep up your agreed payments
- Only available if you live in England, Wales or Northern Ireland
Will an IVA be approved?
Generally speaking, IVAs are accepted in most cases.
Your IP will take responsibility for preparing your IVA and forward it to your creditors for negotiation. If at least 75% of your creditors (by debt balance) agree to the IVA, then your IVA will be approved and will be legally binding.
In the unlikely event that your IVA is rejected, you don’t necessarily have to go bankrupt. We’ll talk to you about alternative solutions.
Managing your IVA
You’ll be supported right from the start. Your IP is there to explain the process and make it easier for you to succeed.
Don’t worry about projecting your budget over a five-year period. Your IP will review your IVA every year, so if your circumstances change in any way, it can be reworked based on your new situation.
It is also possible to reduce your payments into an IVA, with the permission of your creditors. If it’s a genuine change in circumstances, most will agree.
In a non-self-employed IVA, you can’t usually obtain credit of more than £500 without the permission of the Supervisor. In a self-employed IVA, you are more likely to be allowed further credit if you can afford the repayments and need it for a viable business. For example, if you’re a consultant and have to pay monthly expenses before being paid at the end of each month, it may be possible to have a small overdraft to allow you to pay these expenses.
Do I qualify for a self-employed IVA?
Let’s find out. At PayPlan, we have a specialist team dealing with self-employed IVAs who can check whether this is the best solution for your situation.
Self-employed IVAs are not available in Scotland – take a look at other debt solutions for Scottish businesses.
Generally speaking, if you work for yourself and sell goods or services, it could be a good option for you. Below are a few examples of who might qualify for a self-employed IVA:
- Construction Industry Scheme (CIS) Workers
- Buy-to-let landlords
- Childcare providers
- Freelance designers
Questions? Get answers here. You can also check out our expert Insolvency Practitioner, Nick Payne’s blog – Nick has more than 20 years’ experience of helping set up IVAs.
Don’t wait any longer. Call us free on 0800 280 2816, email us or use our debt help form for advice on the best way to manage your debt.
Self-Employed IVA client reviews
Excellent service. Professional advice puts your mind at ease. Would and have recommended to others.
Very good, very helpful and understanding staff.
Since my initial phone call to Payplan their service has been fantastic . I was totally lost with debts spiralling out of control with phone calls day and night. Payplan set up an IVA of which I am nearly half way through which has got me back on my feet with calculated monthly payments and at the end I get a second chance with a clean slate. I cannot thank them enough for their service to me.