Pros and cons of a self-employed IVA
Are you wondering if a self-employed IVA is the right debt solution for you? If so, have a read of the advantages and disadvantages of a self-employed IVA below.
Self-employed IVAs allow you to be debt-free a lot quicker that many other debt solutions, and they offer protection and security whilst you repay your creditors.
If you want to discuss your options with a professional debt adviser, we offer FREE debt advice, and you can speak to us with no obligation. We aim to provide our customers with information on a wide range of debt solutions and then help them by recommending the best option for their own particular circumstances.
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Advantages of a self-employed IVA
- Continue to trade – By entering a self-employed IVA, your business will be allowed to continue trading. The Supervisor will allow you to carry on running your business, with the self-employed IVA giving you protection from any legal action by your unsecured creditors. If you’re the Director of a Limited Company, you should be able to continue in your post, unlike in bankruptcy. Also, don’t worry if your business income fluctuates, and you can’t afford a fixed monthly payment amount. Self-employed IVA monthly payments can be flexible, taking into account any seasonal fluctuations in income
- Frozen interests and charges – When your creditors agree to your self-employed IVA proposal, your debt is frozen and no further interest or charges can be added to the total amount due
- No legal action – As part of the self-employed IVA agreement, your creditors are not allowed to pursue any further legal action against you. Also, any current legal proceedings must also be stopped
- Flexibility – IVAs are generally quite flexible, as it is understood that from time to time your circumstances may change. Self-employed IVAs tend to be even more flexible, so if your business income is seasonal, your creditors might agree to allow payment variations
- Prioritising creditors – If you owe money to your trade suppliers and your business depends on continuing to purchase from them, you can prioritise their repayments, so your business can continue as normal
- Business assets protected – As it’s normally the income from your business that will enable you to successfully complete your self-employed IVA, your business assets will normally be unaffected, especially if you need them to carry on your business
- Control of your business and your debts – A self-employed IVA allows you to still remain in complete control of your business whilst taking control of your debts. Once you’re in control of your debts, you should find you can start to enjoy life again
- Peace of mind – As long as you keep to all the self-employed IVA terms and conditions (including making all your agreed payments in full and on time), at the end of your arrangement, the creditors included in your IVA will write off any outstanding debts and you could be completely debt-free
- Affordable – The agreed monthly IVA payment amount is completely based on what you can afford, after all your essential living and business costs have been taken care of – so although you will have to budget carefully, you should still be able to live a comfortable life
- Easy to set up – Self-employed IVAs through our chosen specialist partner (PayPlan Bespoke Solutions Limited) have an approval rate of 80-85%, and they will advise and guide you at every stage of the application process. You should be able to regain control of your debts in no time
- Your home will be safe – Unlike with bankruptcy, you won’t be forced to sell your home in a self-employed IVA. If there is ever a condition that your creditors propose that you don’t agree with, you could decide to reject their stipulations, and look at alternative debt solution options instead
Disadvantages of a self-employed IVA
- Credit rating – A self-employed IVA will be recorded on your credit file for a period of 6 years from the date your proposal was agreed, or until your self-employed IVA is completed, whichever is longer. This will affect your ability to get credit. If you’ve defaulted on your bills before you get in touch with us, these defaults will already have been recorded on your credit file, and the odds are that you were already struggling to obtain further credit anyway
- Insolvency Register – Your self-employed IVA will be listed on the Insolvency Register, which is available online to all members of the public
- Re-mortgaging your home If you have a lot of equity in your home (or any other property you own), you might be asked to release some of this equity (via a re-mortgage or secured loan) and pay the released amount into your self-employed IVA for the benefit of your creditors. If this isn’t a viable option, there is usually the alternative of extending your self-employed IVA for a maximum of 12 months
- Flexible payments – These are available with a self-employed IVA, as long as there is a genuine reason for the request, and you agree it in advance with your Supervisor. But if you continuously miss payments without permission, your self-employed IVA could fail, and the benefits of your agreement – like no legal action and frozen interest & charges – could be revoked
- Annual reviews – Your agreed monthly IVA payment amount is reviewed annually – and if your income has increased, you may be asked to increase your future payments. This could work to your advantage however as if you are struggling to make your monthly payments, they can be adjusted as required at your annual review.
- Windfalls – If you receive a windfall – such as inheritance or a lottery win – you will be expected to pay this into your self-employed IVA. As your unsecured creditors will probably end up writing-off a large proportion of your debt, it is only fair that they should expect you to do everything you can to repay as much as you can afford. Paying a windfall into your self-employed IVA is not necessarily always a disadvantage – if it is large enough, it could allow you to repay all your debts, finish your IVA sooner, and get on with your life.
- Risk of bankruptcy – If you fail to keep up your IVA payments as agreed, your IVA could fail and your creditors might petition for your bankruptcy.
- Only unsecured debts can be included in an IVA – You will have to pay secured debts like your mortgage on top of your IVA. However your IP will take this into consideration when looking at your income and expenditure and an allowance will be accounted for to ensure these payments are made.
Think a self-employed IVA might be right for you? Call us FREE on 0800 280 2816 and we’ll discuss all your options, and help you find the right debt solution for you.