If your financial problems have reached the point where you do not see a way out and you feel as though you are drowning in debt, your best way out is through declaring bankruptcy. Filing may well allow you to get your finances back on track
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4 options to solve debt problems for self employedDuring an economic downturn, many sole traders and the self
employed prop up their business with personal borrowing. If things go wrong, the
individual is left with large personal debt which they cannot repay. What
options are there available to resolve these problems?
If you are a sole trader and you borrow money to support your business, it is
you who are personally liable for the debt. When things go well, this is no
problem as the business will be able to fund you so that you can make the
necessary payments. When the business starts to struggle however, you may no
longer be able to draw enough funds to support your debt.
If you are in this situation of being unable to repay the debt which you
borrowed to support your business, the solutions available to resolve this
situation are very similar to those used to resolve any personal debt problem.
There are four main solutions to consider:
Consolidation
If you are still able to draw some funds from your business and your debts
are not too large, you may be able to consider consolidating with a single loan.
The advantage of consolidation is that the single monthly payment you make will
generally be lower than the total of the amounts you pay on all of the current
debts. This lower payment may be affordable with your reduced budget.
If your debts are more than GBP15,000 - GBP20,000 you may struggle to find a
bank willing to lend a loan large enough pay off all of your old debts and in
these circumstances, consolidation may not be appropriate.
Debt Management Plan
A debt management plan is an informal agreement with all of your creditors to
reduce the repayments they receive each month to fit into the budget you can
afford. The solution can work well if the majority of your creditors are banks.
However if you also owe money to suppliers and the inland revenue, these
creditors are often not so willing to agree reduced payment plans and can be
very difficult to deal with.
Individual Voluntary Arrangement
Where you can afford to pay something towards your debts each month, an
individual voluntary arrangement (IVA) may be a very good solution. The original
idea behind the IVA was to help business people who were struggling with debts.
The IVA will reduce the monthly debt repayments you make to fit to a manageable
budget. After 5 years of payments, the creditors agree to write off outstanding
debt and you are left to continue with your business debt free. Creditors such
as the Inland Revenue and trade suppliers can be included in an IVA. This is a
very common solution used by sole traders.
Bankruptcy
If you find yourself in a position where you do not have enough income from
your business even to make reduced payments each month, the most appropriate
option may be to declare bankruptcy. You will not be required to pay towards
your debt unless you can afford to do so. Many people are concerned that if they
are homeowners and declare bankruptcy, they will lose their property. However,
if there is little or no equity in the home, there is every likelihood that it
can be saved. Most importantly, if you declare bankruptcy, as a sole trader, you
can continue to run your business. As such you have the opportunity to continue
to earn a living without the burden of paying your debts.
As a sole trader in the current economic downturn, you need to be 100%
focused on generating additional business. Where you have the additional worry
of a debt problem, you will not be able to give your business the focus it
requires. Burrowing your head in the sand will not make a debt problem go away
and therefore the best course of action is to deal with the debts head on.
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Solve Debt Problems, Solve Debt, Debt Problems, Self Employed, Sole Trader, Debt Problem, Each Month, Declare Bankruptcy
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