Payment break?

[Scrooge]

We are curently about 16 months into our IVA - really struggling to meet the payments as we run a cafe/restaurant and trade is really down - the town is generally becoming very run down with more and more empty shops/businesses up for sale. We are also suffering with the huge hikes in food prices - unfortunately we hadnt long put prices up and to raise them anymore would undoubtedly alienate the customers we do have. We are temporarily being helped out financially by family.
Anyway looking ahead...next year we are facing the opening of a large national all day pub/restaurant chain moving into the town... We believe this will "knock us for six"!!
As we are already only paying back 26p in £ on our very substantial debt built up over 20 years we were wondering if we might be allowed to take a "payment break" for say 6 months when this place opens to allow us to try and ride out the worst of the storm??
I know this is not until some time next year but if we leave things till it is too late...well,obviously it will be too late!!
It is sooo hard trying to cope with the IVA when you havent got a regular income....obviously the good times should cover the bad but right now its just bad times.

[MelanieGiles]

Hi Scrooge

I am sorry to be the bearer of gloom and doom, but are you not fighting a lost cause with your business? The competition from the new outlet is bound to affect your business, so I feel that a payment break is likely to be no more than sticking plaster over an unhealable wound.

How much are you currently drawing from the business as income, and how easy would it be for you to get jobs which would pay similar levels?

Sometimes you just have to admit defeat and walk on, but I wish you the best of luck in whatever you decide to do.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Scrooge]

Wise words, maybe, Melanie but I dont think we want to throw in the towel without a damn good fight. We have had our home and business for twenty years - not easy to chuck it all away - Besides which I thought IVAs were originally designed precisely for small businesses such as ours? So surely there must be some understanding of just such a situation as the one we are facing?
We may be struggling and have both taken on extra jobs as well as the business, but we ARE making the payments.
We are proud people, just like everyone else on here I am sure - we want to pay as much as possible of our debt - but surely what you are suggesting is bankruptcy which will ultimately give very little back to our creditors and leave a family homeless and basically unemployed??
What I am suggesting is the possibility of a 6 month "holiday" from making payments into the IVA just to give us a chance to see if we can survive this new place opening?
There is no chance of either of us finding employment that would allow us to stay in the property market - the way things are locally the only option would be low paid jobs and housing benefit.

[MelanieGiles]

A payment break may well be possible with the agreement of your creditors, but you will need to discuss this with your IP directly who has detailed knowledge of your case. You will need to demonstrate that your troubles are temporary and that you are taking steps to return the business to profitability.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[Cybus]

I'm in agreement with what Melanie has suggested.
I would just add that a request for a payment holiday is usually met with a requirement by creditors for an equally long extension to the term of the arrangement.
There is another danger in taking a payment break. I wonder what you would do with the monies you would save by not making ther payments in to the arrangement? My concern is that if you do not recognise the fact that the business will not survive against the competition, you might find yourself using the funds you have saved whilst not making contributions to fund your contributions when you re-commence payments after the payment break. If that is something that you do find yourself doing, then you may find yourself back at square one when those monies run out. Something to bear in mind

Tell it like it is.

[Scrooge]

Cybus - The whole point of suggesting a payment break is because we are looking ahead and anticipating that we will not be taking enough to cover our IVA payments during the first few months of this new business opening - NOT because we want to save up for 6 months!!
Anyone in this type of business will know that small town mentality is to be the first through the door on opening day of any new shop!! We would anticipate loosing a considerasble amount of trade to the new place whilst customers try it out - we would also hope that after 2 or 3 months customers will start drifting back....
Local chamber of commersce believe that the town will loose a couple of pubs and a couple of cafes when this new place opens.....A lot will be able to increase their overdraft facilities for a while to ride out the storm - we cant...However not making the hefty IVA payment for a few months could put us in a more favourable position - ie allow us to ride out the storm and hoping that one of our more direct competitors might pull out.
There seems a distinct lack of understanding of small businesses when it comes to an IVA which surprises me since this was what they were originslly "invented" for. What we need is more flexibility.
If after 5 or 6 months our takings do not pick up again then we would obviously have to give up and file for bankruptcy but there seems no point in pulling the plug on what is essentialy a very profitable business.
Being self employed we are at a huge disadvantage in our IVA compared to anyone on a regular salary who basically only has to tighten their puse strings for 5 years. We seem to be in the minority, being self employed with a fluctuating level of income.

[Adam Davies]

Hi
Go for the payment break,you really have nothing to lose and loads to gain.
Service in your industry is a huge factor and something that you may well still be able to beat the "big boys "at.
Good luck

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[Cybus]

I was not suggesting you were asking for a payment break so you could save for six months. During that six months, you have conceded that your already suffering business is going to suffer a further downturn as a result of competition from the pub chain moving in to the town.

What I was suggesting you consider is this -

During that 6 month period - is your business going to produce enough revenue to keep itself going and more importantly provide you with enough to live on - forget the voluntary arrangement contributions for the time being. Please don't take this the wrong way, but you won't be able to simply shut up shop during that 6 months. You are still going to be incurring overheads and unfortunately you're still going to have to pay your Self Assessment Tax and the Tax and National Insurance of your employees (Assuming you have any that are subject to deductions.)
What I'm asking is if during that six months, you have very little trade through your doors, can you meet those overheads and SA payments from your 2nd job incomes and without incurring further credit, given that you are already being helped out financially by your family?
I'm not suggesting you throw in the towel. Nor am I speaking as someone who has experience of running a business. I am trying to give an insight in to what your creditors may be thinking and asking should a variation for a payment break be put to them.



Tell it like it is.

[Scrooge]

Andy - thank you for your more positive reply - as you say, we would have nothing to lose!
Cybus - We would certainly not even be considering shutting up shop for 6 months!
We are anticipating that trade will be down - not totally non-existent. My thought would be to suggest either we go for a break whereby we pay nothing for say 6 months OR we pay in whatever we can afford without having to meet a minimum. |At the end of the period whatever we have set aside could be used to shorten the duration of the extension period at the end of the IVA, in other words, if at the end of the 6 months we had paid in enough to cover 2 months payments then IP would only need to extend our IVA by 4 months.
The business is profitable - without the IVA we would be sitting pretty.

[MelanieGiles]

Your suggestion to pay over what you can afford is certainly better than no payments at all, but I still feel that your IP will be a bit sceptical about your proposed plan. You must now take advice directly from them, as they have detailed knowledge of your case and forums like this are available to give support and general tips, but not detailed advice about your own individual circumstances.

Good luck and I hope to see you posting in a few months time saying that you have bounced that competitor right out of town!

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp