Interlocking IVA's - Explained
Voluntary Arrangements for Individuals in Partnerships
Operating a partnership can be stressful especially if it has debt problems. Debts can accumulate for a range of reasons; bad debts, lost contracts, or just poor financial control. The debts may be a combination of business and personal, as often personal loans and credit card debt is accrued trying to support the business.
Voluntary Arrangements can be used in a number of ways:-
Arrangements based on contributions
The most common IVA involves the individual retaining his or her business assets but instead offering to pay monthly contributions out of future earnings over a fixed period of time, usually 5 years. Where there is a personal property with equity, creditors will expect that a sum is introduced at the end of the arrangement in place of a share of the trader's equity.
Partners can propose interlocking IVA's which essentially provide for the partners to make one monthly contribution to settle all debts irrespective of whether the debts are in either partner's name or owed jointly.
Arrangements based on a full and final settlement
Generally these types of arrangements offer creditors a lump sum to settle their debts.
For example:-
Helen and Adam are publicans and have around £40,000 of debt consisting of Inland Revenue Self Assessment tax, loans and credit cards. They have a property which is rented out and will generate around £25,000 if sold. They have increased trade at the pub which is now operating profitably. Their income can now cover future trading expenses but is insufficient to cover debt repayments.
Solution
The partners can put forward full and final interlocking IVA's offering creditors a lump sum of £25,000 to settle debts of £40,000. After costs creditors would receive around 50p in the £.
The Next Step
The options for a financially distressed business need to be very carefully considered. Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREE ADVICE LINE 0800 781 0990.
All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to advise and administer the most appropriate action - all fees will be outlined during your consultation. Retained payment may place you further into arrears. The Business Debt Advisor complies with the Consumer Credit Act and you have the right to a cooling off period of 7 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.
Calls to our free phone number from mobile phones and other networks may be charged.