IVAs for the Self Employed

An IVA is a government-approved method of clearing your debts and gaining a fresh start. They are available to self employed people, as well as those in standard employment. They are currently available within England, Wales and Northern Ireland. Scotland has its own laws and schemes available to those residing within that country.

Self-employed people are eligible for Individual Voluntary Arrangements. Their business can run into financial difficulties for many reasons, not all the fault of the trader. There are two types of agreements that a self-employed trader can choose from. The first is involves an arrangement by which the trader keeps their business and its assett but pays a monthly contribution out of their income over a fixed period of time - this is usually three to five years. Debtors with property (non-commercial) may also be asked to release the equity in this property towards the end of the Voluntary Arrangement, rather than awarding the creditors a share of the trader's commercial equity.

The other possible Voluntary Arrangement that can be agreed involves making a full and final settlement payment. Under this type of arrangement, creditors are offered a one off lump sum payment, to settle the debt. If the debtor can sell a significant asset and offer each creditor a final lump sum payment, they will be able to recover significantly more than the repayment type of IVA.

There are however some issues relating to self-employed persons that you might want to be aware when considering an Individual Voluntary Arrangement. You may not qualify for an IVA if you have been self-employed for less than two years. Also, because your income fluctuates from month to month and year to year, it might be difficult to work out if you qualify for an IVA. You will also have to produce a vast amount of documentation as evidence for proof that you qualify for one of the IVA choices.