Sole traders and partners don't have the protection offered to limited companies who took out bounce back loans. However, they can be reassured, that under the terms of the bounce back loan scheme, no recovery action can be taken by lenders over either a principal private residence or a primary personal vehicle - their home or car.
This does not mean however that they cannot be pursued for outstanding bounce back loan debts or unpaid instalments. Other personal assets may still be at risk of recovery action. Ultimately the bank could take action to recover the funds via a bankruptcy petition.
The key problem for sole traders, is that legally, there is no difference between personal and business assets. This means that any business debt for a sole trader is personally owed and therefore recoverable from personal assets.
The first question is can you afford to pay back the loan? Whilst there is much talk of bounce back loans being written off you will need to demonstrate that you are not able to repay it.
If it's clear you can't afford to pay the loan (for example if you have closed the business), then you should first speak to a debt advisor to understand all your options. A debt advisor will look at all your debts and work out the quickest and cheapest way of tackling the debts, you can book to speak with one of our experienced advisors here.
Not everyone is comfortable speaking about debts on the phone, so you could look at your options first by using our online debt help tool, you can register a free account here.
When getting help with a bounce back loan as a sole trader, the bounce back loan is treated like any other personal unsecured debt from a bank. Although the debt is guaranteed by the government (to the bank), as the lender, your loan is directly from the bank, and they will be the first to seek repayment.
It will be necessary to consider your overall position and assess the best solution for you. The bank and the debt advisor will also need to know what the bounce back loan was used for. If the loan has been used to support your business through the pandemic there will be no problem. However, if it can be shown that you have used the funds to buy personal assets there is a risk that this could be considered to be fraud, with the associated legal action.
If you are now in a position, taking into account your assets, that you can't repay your debts an IVA could protect you.
An IVA (Individual Voluntary Arrangement) is a debt solution that allows you to "freeze" your debt and agree to pay them back over a period of months or years. At the end of the IVA (typically 5 years), any debt still outstanding is written off. Many debt companies advertise huge debt write offs of over 90%. This is rare, but a typical IVA writes off 30-40% of debt (Which is still a huge amount of the unaffordable debt).
There are many organisations offering IVA's, but it's important to consider the fees involved.
There is no "fee free" option for an IVA with any providers (including charitable organisations), but all fees are included within the IVA (you don't pay them on-top of monthly repayments). However, if for any reason your IVA does not complete, then higher IVA fees could mean little of your debt has been cleared.
Here at Angel Advance, we charge industry leading low fees. There is nothing hidden or additional to pay. We charge a simple flat rate from each monthly payment - spread evenly over the life of the IVA. This structure is designed to protect our clients if their circumstances change, and the IVA fails to complete (maximising the amount of debt cleared during the IVA). Click here to find out more about an IVA with Angel Advance.
We have also made applying for an IVA as simple as possible, you can apply for an IVA with Angel Advance online or by phone:
Angel Advance provides online debt advice to get you back on track and make your finances more manageable.Get Debt Advice Now