Owning a business is a journey of highs and lows. For self-employed individuals, financial stability is as essential as the services they offer. Yet, there are times when debts become overwhelming, and a sustainable solution is needed. For self-employed professionals in the UK, an Individual Voluntary Arrangement (IVA) could be the answer. Specifically tailored for individuals, the relationship between an Individual Voluntary Arrangement and self-employment is intriguing and can offer a lifeline for business owners mired in debt.

What is an Individual Voluntary Arrangement (IVA)?

An IVA is a formal and legally binding agreement between you and your creditors. It allows you to pay back your debts over a set period, often five or six years. Once the duration of the IVA is over, any remaining debt is typically written off. It provides a more structured alternative to bankruptcy and can be particularly useful for self-employed individuals, given its flexibility.

The Link Between Individual Voluntary Arrangement and Self-Employment

  • Flexibility: Unlike other debt solutions, IVAs can be modified to fit the unique financial circumstances of self-employed individuals. Monthly payments can be based on the actual income, which might fluctuate from month to month.
  • Business Operations: One of the significant advantages of choosing an IVA over bankruptcy is the ability to continue operating your business. Bankruptcy often leads to the seizing of assets, which can include business tools or even the business itself. With an IVA, you retain control over your business operations while addressing your debts.
  • Privacy: An Individual Voluntary Arrangement and self-employment often go hand in hand due to the discretion it offers. Unlike bankruptcy, which is publicised, IVAs allow business owners to handle their financial difficulties without alarming clients or suppliers unnecessarily.

The Process: How Does It Work?

  • Seek Advice: Before making any decisions, consult with a licensed insolvency practitioner (IP). They’ll assess your financial situation, provide guidance on the best steps, and help determine if an IVA is the right option.
  • Proposal Drafting: If an IVA is deemed suitable, the IP will draft a proposal for your creditors. This will outline how much you can pay, the duration of the IVA, and how the assets, if any, will be treated.
  • Creditors’ Meeting: Creditors will review and vote on the proposal. If 75% (by debt value) agree the IVA is approved. All creditors are then bound by it, even if they voted against or did not vote.
  • Regular Payments: You’ll make regular payments based on the terms of the agreement, usually monthly. These go to the IP, who then distributes the funds to creditors.
  • Completion: Once all payments are made any remaining debt is written off. You’ll be free from the pressures of those debts and can focus wholly on your business.

Is An IVA Right For You?

While the synergy between an Individual Voluntary Arrangement and self-employment can seem perfect, it’s essential to assess if it’s the right solution for you:

  • Consider your assets: If you have significant assets that are not critical to your business, creditors might expect them to be included in the IVA, potentially leading to their sale.
  • Future credit: An IVA will impact your credit rating for six years, affecting your ability to secure loans or other credit lines.
  • Commitment: IVAs require a long-term commitment. Ensure you can manage the monthly payments. If your circumstances change, you must notify your IP, as the IVA can sometimes be adjusted.
  • Professional implications: Some professions have regulations against members having an active IVA. Always check with your professional body before proceeding.

In Conclusion

An Individual Voluntary Arrangement and self-employment are like two sides of a coin, offering a structured yet flexible debt solution for business owners. The UK’s financial framework recognises the unique challenges self-employed individuals face, ensuring there’s always a lifeline available.

While an IVA isn’t a one-size-fits-all, it is an essential tool in the arsenal for those seeking relief from crippling debts without sacrificing their business aspirations.

Always seek expert advice to fully understand the implications and benefits of an IVA in relation to your specific situation. Being proactive and informed is the key to successfully navigating the complex landscape of debt solutions.

Need Expert Guidance? Don’t navigate the complexities of debt solutions alone. Reach out to our team today and call us at 01603 552028 or drop us an email at mail@leading.uk.com. We’re here to provide tailored advice to help you make informed decisions for your financial future.