I have just joined this forum but have been looking at at it since a few months before my IVA started in APril 2008.
I am currently in an IVA. My wife is not part of the agreement as it was me who incurred the debt without her knowledge. She of course knows about it now though.
I have a question for you regarding limited companies.
I am currently employed and my wife is a housewife. I don’t really have any intention to change this at the moment but in a discussion about moneymaking and the iva a few questions were raised.
I intend to stay employed by my company (fingers crossed!) and do not wish to change this as we are managing the IVA effectively.
If me and my wife were to start a ltd company as a channel for making more money over and above my current salary, how would this affect monthly iva payments?
I’ll give you a scenario just to give you an idea:
1. We just draw dividends from the company once or maybe twice a year (which would be the full amount of profit after costs/tax etc, as I am aware I am not allowed to hold savings whilst in an IVA and I assume that any amount left over as profit would be classed as just that).
How much of the dividends would be payable into the IVA?
Just mine?
Mine and my wife’s?
A percentage of both?
Would this affect my monthly IVA payment at the annual review?
I think my main concern here would be if say for instance we did well for 6 months and then not so well for 6 months, the IVA monthly payment would rise but we would not have the excess funds to pay it, and if that is the case then it’s not worth, in my opinion taking the risk.
Of course I guess that there would also be a bonus to creditors in that they would get a bigger dividend back over the term of the IVA.
In very general terms, as long as your IVA payments are being met, a sensible view needs to be taken regarding income from a new company and this is a decision that will be made by you IP when considering the proposal.
You need to make projections for the new business, these will anticipate peaks and troughs and should hopefully deal with your concerns by accruing for payments to be made in the future.
How a new income is taken into account will very much depend on the wording of the proposal and the best person to advise you here will be your IP.
The easiest thing to do would be to take the IVA out of the equation to give you more freedom , but I expect that this is not an option?
Kind regards,
Angela Rosler
Insolvency Manager
Helping people with their debt problems for nearly 10 years.
Contact me directly for free, impartial, confidential help and guidance.
Your IP would be concerned if your wife was effectively taking income out of the business without necessarily earning it - ie that her involvement were merely to keep your income lower - please don't think I am suggesting that you would be doing this, but I am highlighting the IP thought process for you!
If your wife were to receive and income from the business, she would then be required to pay more towards the joint household expenditure, leaving you needing to contribute less - and therefore your disposable income would incraase and potentially therefore so would your IVA payments.
Also don't forget that you have to provide for corporation tax within the company before you draw out dividends!
My wife wouldn't be taking money out of the company without earning it. We both have various things that we can do that could make money over and above my salary and I was looking at the ltd company as a way of being an 'umbrella company' for making money out of a few different skill sets that we have.
I think my main concern is that this wouldn't currently be a business that necessarily would provide a regular extra income so it would worry me that this could potentially increase the monthly payment and put us in an awkward position if we did not maintain that level of extra income.
My theory with the whole dividends thing was that if we did it that way, it wouldn't matter how much we made, as a percentage of the dividends would always go into the IVA once or twice a year rather than a regular monthly payment which might not be maintained if the extra income diminished.
Does this seem viable or is it a non starter, or should I speak to my IP to see what he says?
thanks for your replies so far. This is a great site which I look on regularly for advice. It also makes you realise that you are by far not the only one in this situation.
I've got 3.5 years left to go and can't believe it's already been a year and a half since the weight was lifted!
It would certainly be worth discussing this with your IP so you know in advance what the implications are. However, I agree that it would be imprudent to increase your monthly payments and if you are not drawing a salary, it would be better to pay into the IVA as and when you draw dividends. Your IP may be happy with 50% of your dividends which would give you an incentive to make the business grow while also providing an improved return to creditors.
