My personal finance is affecting my business
As a sole trader, debts can be extra tricky to deal with because your personal finances and business finances are much more entangled. This means that if your or your partner’s personal finances hit a rough patch, then your sole trader business finances can be affected. Money can get diverted away from the business to help fix the personal situation, strangling the business. Of course, the same could be true in reverse; if the business is struggling, a sole trader will often prop it up personal savings, loans and credit cards.
How can McAlister & Co help when my personal finance is affecting my business as a sole trader?
Many people assume that bankruptcy is the only option if you can’t afford to pay your debts and this can mean having to wrap up your business, leaving you with the extra stress of having no income on top of everything else.
McAlister & Co can help you explore all of the options available to you, including those that allow you to continue trading through a rough financial patch.
How can an IVA help if my personal finance is affecting my business as a sole trader, or vice versa?
As a sole trader, you can enter into an IVA which would place all of your unsecured debt, business and personal, into a manageable plan. Your repayments to creditors would be replaced with a single monthly payment into the IVA and after a fixed period of typically five years, any outstanding debt would be written off.
McAlister & Co are highly experienced at drawing up bespoke proposals for sole traders and we have an excellent industry record for having proposals accepted by consumer creditors, such as credit card companies, as well as smaller, specialist trade creditors. As an IVA is a formal, legal arrangement, as long as you stay within the terms of the agreement, you will be protected from any legal action by your creditors. Your home and other assets are also far better protected in an IVA arrangement compared to a bankruptcy.
In most cases, you will be able to carry on trading while in an IVA. Our aim with in placing you in an IVA would be to put you back in control of your financial situation and successfully turn around your sole trader business.
How can bankruptcy help if my personal finance is affecting my business as a sole trader, or vice versa?
Bankruptcy can give you a fresh start, effectively wiping the financial slate clean. As a sole trader, both your business and personal debts would be included in the bankruptcy and once discharged, usually after a period of twelve months, your debt is written off. Bankruptcy is a formal, legal procedure and creditors would no longer be allowed to contact you to claim repayments.
Bankruptcy should not be seen as an easy option; the restrictions and consequences can be serious. If you own your own home or other assets, these are likely to be sold to recoup money for your creditors. Your sole trader business would usually be wound up upon entering bankruptcy, although you would be able to trade under the name you were made bankrupt.
As a discharged bankrupt, you may still have problems obtaining credit and opening bank accounts and may have to declare your status to future employers.