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My partner is a franchaisee of a hair salon. The business financial plan identifies that there needs to be an income of around 5 to 6 thousand taking a week. Currently it is taking 3.5 - 4 thousand a week. We have supplemented the business by agreeing a loan with the bank and by introducing some personal savings. To date we have approximately 88 thousand debt. My partners health is suffering from this and we just want to be rid of the business entirely. There is not the possibility of the sale of the salon due to it only having 1 years duration left on its current lease.

I am in a stable job and have a regular income however my name is not attached to the business in any way. We do own (mortgage) our house together and I fear we could lose this due to the debt? All mortgage payments are up to date. The major debt is to the bank (bank loan - approx £50,000), business credit cards (approx £15,000) and the revenue and customs (approx £23,000). Does my partner qualify for IVA? With no major assets other than her stake in the equity of our home, what would be the monthly repayments? We have worked out we could afford approx £200 - £250 per month. Is our home in jeopardy?

Your assistance would be welcome

Hey Les, welcome to the forum. An expert will be along shortly to advise you so hang in there. Viki X

Hi Les

First of all, well done in coming here, whatever the route forward is for you, the good people on here will help you through it.

First of all, is your partners business a Limited company?

I'm also not sure on how the franchise company will see any of the routes forward that may be available to you. It may be a situation that Bankruptcy is a no go area, thats if your partner wants to stay there of course!

Given the amount of debt that there is owing an IVA wouldn’t be an option as the dividend would be far to low and wouldn’t be accepted. If the business is a Limited company a CVA may be an option but im not sure about what the criteria is for one and whether an IP could make it fit, one of the experts will know! Can you tell us how much you currently owe on your property and how much is its value? Try to be realistic on this and not think of it from a getting as much as you can for it point of view!! Do you have any secured loans on it and if so how much? All of this is really important stuff in giving us the info that we need to enable us to help you.
Does your partner own a car and if so what is it and what’s its current value? Bankruptcy may well be an option but we do need more in depth details from you to advise further.

Don’t worry though because its seldom as bad as you think!

Loads

Hi there Les

The contributions you are able to offer are rather low, compared to the level of your debts, but an offer could be improved if you have equity in your property which could be released during the final year of IVAs - and I assume that there is some salon equipment which could be sold as well.

I suggest that you take some direct advice from an insolvency practitioner, who can go through all of the options with you and your partner. I am sure that this will not result in you losing your house, but best to act sooner rather than later in order that you get some reassurance on that point.

I wouldn't completely rule out a Voluntary Arrangement in this case at this stage, but I would certainly urge you to set up a face to face meeting with an IP who specialises in sole traders/small businesses. Probably best if you can find one in your own locality for convenience, so visit www.iva.com to look around and take time to speak to 2 or 3 different providers.

Regards.

First of all thanks for the support shown in these early stages. In answer to some of the questions from you guys:
Jointly we have about 100,000 equity in our house. Valued at £330K, mortgage owed approx £230K.
Partner has a BMW convertible (approx value £6K). No other assets.
Business is not a limited company.
No secured loans against our prperty.
Affordable 'repayment' based upon no realistic income from my partner however could be stretched to £300/MONTH.
Sale of furnishing and fittings - modern salon, cost unknown (approx £5k ???)
Sale of goodwill (existing clientel ??)
Partner definately wants out of existing business.

IP for advice being sought now.

An IVA would work, if your partner was prepared to also offer her equity in your property to creditors.

How does this work? would I have to get another £50K on the mortgage in my name? Does my partners name come off the mortgage and therefore I have full control and responsibility for all payments? What happens if the housing evaluation continues to drop? If her equity is £50K, do I have to offer £50K? I want to help her but don't know what to do for the best. We could downsize in house but would loose out major as this is not a good time to be thinking about selling a house. HELP!

In an IVA your partner would be asked to get the property revalued during the final year and raise her share of new lending based upon 85% of the value of the property which is then used to firstly pay off the existing mortgage leaving a balance to inject into the IVA by way of an additional contribution.

At this stage it would be better for her to take expert professional advice, in order that she can fully understand the implications of pledging a proportion of her home to the IVA.