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Self-employed IVAs and your Assets


Self-employed IVAs and your Assets

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One key advantage which IVAs have over bankruptcy is that you will be able to retain your assets – including your property if you are a homeowner. With a self-employed IVA, you can still keep all of your assets in the vast majority of cases, but there are a few exceptions you should consider.

IVAs were originally designed with business owners in mind, so it makes sense that this solution for repaying your debts disrupts trading far less than bankruptcy would. Nonetheless, there are instances where a few assets might need to be sold.

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Business-related Assets

Your creditors are likely to make a far better return on what they leant you if your business continues to operate. For this to happen, of course, you will need to retain the tools, equipment, vehicles, or technology associated with the business, and will not be required to relinquish any of these assets. In a few cases, you may be asked to replace very valuable work-related assets with less expensive ones, and pay the difference towards your IVA.

For example, if your business requires you to travel, and you currently own a valuable luxury car, you might be asked to replace it with a practical, inexpensive alternative. Even if you are asked to replace a business-related asset or to, you will never be asked to forego something which is necessary for your business to function.

Personal Assets

As mentioned earlier, IVAs protect your assets. In some rare cases, you might be asked to sell a highly valuable vehicle. However, if you can prove that the vehicle is necessary for your work, which it is likely to be if you are self-employed, you will be able to keep it, or at least a cheaper model. If you own a low-value vehicle, you will probably not be asked to sell it even if it is not deemed necessary to your work, since your creditors would be unlikely to really benefit from its sale by the time administrative costs were covered.

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Your Home

Unlike going through bankruptcy, having an IVA does not put your home at risk. However, if you have enough equity in it, you may be asked to release some in the final year of the IVA’s term by remortgaging. Exactly what happens will depend on how much equity you have in your property:

  • If you have £5,000 or less worth of Equity

If you have little or no equity in your home – £5,000 or less – you will not be asked to release it for your IVA. Instead, you can either make an extra year’s worth of monthly IVA payments, or a third party can make a lump-sum payment in lei of home equity, agreed upon by your creditors. If you do not own a home, you will also need to make either an extra twelve payments or have a third party offer a lump sum.

  • If you have more than £5,000 of Equity

If you have significant equity in your home – more than £5,000 – you will be asked to release some in order to complete your IVA. You will not be asked to release all of your equity, however, but up to 85%. In some cases, it is impossible to release equity because mortgage providers refuse to remortgage a property. If this occurs, you must instead agree to make an additional 12 months of payments, or have a third party make a lump sum payment towards your IVA on your behalf.

For more information, and to see whether an IVA would be the right solution for you, you can speak to a friendly Creditfix advisor by calling 0808 2085 198. Alternatively, click here to find out more about how an IVA could help your business.