An IVA is only available to residents in England, Wales and NI
Being self-employed can be a great way to achieve maximum flexibility and a better work-life balance all whilst doing something you love. But what are your options when being self-employed leads you down a financial black hole and you find yourself facing personal or business debt?
There is plenty of information out there on how to get an Individual Voluntary Arrangement (IVA) when you’re employed but it may surprise you to know that you can also get an IVA if you’re self-employed and earning an irregular income.
In this guide, we’ll cover everything you need to know about starting an IVA when you’re self-employed including what a self-employed IVA is, what the difference between an IVA and a self-employed IVA is, what debts can be included in a self-employed IVA, how to qualify for a self-employed IVA and how to apply for a self-employed IVA.
IVA is debt solution which allows you to write off up to 81% of unsecured debt with government legislation
What is a self-employed IVA?
A self-employed IVA works in a similar same way as a standard IVA in that it allows you to repay your business and personal debts through a series of affordable monthly payments based on your income and expenditure. Unlike bankruptcy, you can keep your business assets and personal assets and your business can continue to trade as long as it is considered a viable business.
The typical length of a self-employed IVA is five years although this can be extended to six years if you incur missed payments or apply for a payment break at some point during your arrangement.
Like a standard IVA, a self-employed IVA will also be managed by an Insolvency Practitioner (IP) and noted on your credit file for a total of six years from the date it was approved. During this time, your credit score will be lowered and you may struggle to obtain further credit such as a loan, mortgage or phone contract.
Reduced By 72% * monthly payments are based on individual financial circumstances Whilst a self-employed IVA works in the same way as a standard IVA, there are some key differences you should be aware of. With a standard IVA, you will more than likely have a regular monthly income and therefore should be able to make the same monthly payment towards your arrangement. However, because your income is likely to be irregular if you are self-employed, how much you pay into your IVA every month can be a little more flexible. It is also possible to increase your decrease your monthly payments from month to month with a self-employed IVA as long as you inform your IP of any changes to your financial circumstances. Most financial experts recommend opening a new bank account when you enter into a standard IVA to prevent the bank from exercising the ‘right to offset’ or seizing money directly from your account to repay other debts. With a self-employed IVA, however, you may be allowed to keep your business bank account if you need it to continue to trade even if it is overdrawn. When you enter into a standard IVA, you must seek permission from your IP if you wish to obtain credit worth more than £500 at any point during your arrangement. Whilst you may still need to do this with a self-employed IVA, your IP is likely to be a little more flexible and may even allow you to exclude a line of business credit from your IVA so you can continue to run your business as normal and maintain good working relationships. With a standard IVA, your creditors are treated equally and will write off the remainder of your debt when your arrangement comes to an end. However, with a self-employed IVA, you can choose to prioritise certain creditors based on which debts you need to pay first to continue operating your business. If you are considering a self-employed IVA, you must familiarise yourself with the types of debt that can be included in your arrangement before making any decisions. Like a standard IVA, a self-employed IVA can include most unsecured debts, for example: There are, however, some debts that can’t be included in a self-employed IVA, such as: "Professional staff - they were understanding and non-judgmental. Fantastic, quick service too. Would recommend to anyone!" Michael, Sunderland Just as there are rules to qualify for a standard IVA, there are certain requirements you must meet if you are to qualify for a self-employed IVA. If you live in England, Wales or Northern Ireland, are self-employed, owe more than £7,000 in unsecured debt and can afford to pay at least £50 a month towards your debt, you are free to apply for a self-employed IVA. If you need help with repaying your unpaid debts but work for yourself, a self-employed IVA can help you fix your relationship with your finances and, more importantly, become debt free. The process of applying for a self-employed IVA is relatively straightforward with just a few simple steps required: During your initial meeting with an IP, you will discuss your financial situation and determine whether a self-employed IVA is the right option for you. Your IP will also devise a plan to help you with your business cash flow over the next 12 months so you can continue to run your business during your arrangement. When the terms of your arrangement have been written up by your IP, they will be sent to your creditors for approval to convince them that your business is making enough to cover your monthly IVA payments. For your self-employed IVA to be approved, a minimum of 75% of your creditors must agree to the proposed terms. When this happens, your IVA will start and all communication from your creditors and interest on your debt will stop. Maxine McCreadie Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed’s, and various other debt solutions. Our debt experts, and insolvency practitioners continually monitor the personal finance and debt industry, and we update our articles when new information becomes available. Current Version March 2 2023 Written by Edited byHere's an example of how we can help
Let's say you owe...
Bank Loans
£11,152
Short Term Loans
£2,226
Phone Bills
£302
Credit cards
£2,395
Store cards
£648
Phone Bills
£1,408
Overdraft
£172
Total amount
£18,303
Customer monthly repayments before and after an IVA
What is the difference between an IVA and a self-employed IVA?
Monthly contributions
Business bank accounts
Credit limits
Creditors
What debts can be included in a self-employed IVA?
How we helped Michael
Do I qualify for a self-employed IVA?
How do I apply for a self-employed IVA?
Initial meeting
IVA proposal
IVA approval
Why choose Creditfix?
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Maxine McCreadie
Maxine McCreadie
