“How much does an IVA cost?” is a common question our advisers are asked here at My IVA Adviser.
Establishing the IVA costs and understanding who pays the costs in an IVA, is really important if you are considering entering into an IVA.
So here is a brief outline of how the IVA costs arise, how much the IVA costs are and who pays for those IVA costs.
What are the IVA costs for?
The principle of an IVA is to allow the applicant to make repayments to his creditors at an affordable rate for a fixed time-frame. The amount to be paid each month is assessed before the IVA begins and the time-frame is normally set to 60 months.
By law, the applicant and his creditors will have to employ the services of a licensed Insolvency Practitioner, also known as an IP, who, to begin with, would put the IVA proposal together and chair a creditors meeting to ensure an agreement was reached.
After this, the IP would supervise the IVA for its full duration in order to make sure the terms of the IVA are being upheld by all parties and then, finally, the IP would bring the IVA to a close by completing the necessary paperwork and notifying the court of the IVA’s successful completion.
Other IP duties would typically include, among other things, the monitoring and collection of IVA contributions and the dispersement of payments to the creditors.
All IVA’s must have a Licensed IP to administer them, and they all charge for carrying out these duties.
Please Note: There are no exceptions - and even IVA’s provided by charitable organisations such as the C.C.C.S.V.A. will charge the same level of IVA fees.
The IVA costs will be detailed in the IVA proposal, where the IP highlights to both parties how much he intends to draw as fees for administering the IVA, whilst stating how and when he intends to draw them.
Creditors will negotiate the level of IVAs fees with the IP as part of the Creditors Meeting, essentially setting limits on IVA fees they consider excessive or too high.
The IP takes the agreed IVA fees from the IVA fund. This is the name given to the money paid into the IVA by the applicant.
Who Pays the IVA Costs?
The IVA costs are taken from the IVA applicant’s IVA fund. It is therefore reasonable to say that the IVA’s costs are paid for using the IVA applicant’s money.
However, when looked at more closely, it can be argued specifically in the event of a successfully completed IVA, the actual IVA costs are paid for by the creditors.
Here’s why.
The IVA applicant is only required to pay into the IVA what is deemed affordable and for fixed period, normally 5 years. Whatever is paid into the IVA fund during this period will settle the debt. If there is any debt left unpaid it is written-off.
It is highly unlikely the applicant will have contributed enough money into his IVA fund to be able to repay his debts in full and having the IVA fund reduced by the IVA costs makes it all the less likely. By allowing the IP to draw his costs from the IVA fund, creditors accept it will ultimately reduce the amount of money they recover from the IVA, a point they accept and agree to at the creditors meeting.
So, in the case of a successfully completed IVA the creditors agree to pay all the IVA costs.
However, when an IVA hits problems and fails to complete successfully things change. It is the applicant who is left to cover the IVA costs, for the IVA costs are deducted from the IVA fund in the same way, but there is no debt write-off to speak of. As a result, the applicant remains liable for the original debt levels, which are only reduced by what’s paid over from the IVA fund after the IVA costs have been draw by the IP.
So, when an IVA fails to complete successfully, it is the applicant who pays all the IVA costs.
How much does an IVA cost?
Over the last 2 years the creditors have taken issue with the level of IVA costs that can be drawn by IPs, stating they felt the IVA fees were too high. There has been much said in the press and on forums about how much an IVA costs, with little sympathy being shown to IP’s for the position they find themselves in.
But after much consultation between the insolvency service, Insolvency Practitioners and the creditors, a new set of guidelines called the ‘IVA Protocol’ has been introduced.
The IVA protocol is designed to streamline the IVA application process, whilst simplifying much of the IP’s workload which, in turn, has ensured that an IVA’s costs are now reduced greatly.
There are 2 main categories that describe the IVA’s costs and they are:
- Nominee Fee: To cover the work done before the IVA creditors meeting. This fee will vary on a case by case basis, but typically will be in the region of £1,000 to £1,500. This is called the Nominee Fee.
- Supervisor Fee: A monthly administration fee will also be charged to administer the IVA throughout the 60 months. The IP will agree this IVA fee with the creditors and it will vary case by case, but would normally be between £400 to £800 per year. Yet again paid for from the IVA fund. This is called the Supervisor Fee.
IMPORTANT: My IVA Adviser operates a No IVA : No Fee policy.
So there you have it, so long as your IVA completes successfully, all IVA costs will be paid for by the creditors from out of the IVA fund.
If you would like to know how much your monthly IVA repayments would be, please call 0800 088 7503 now, and discuss your payments with one of our IVA specialists.
Alternatively, leave your details on our quick contact form on the side of the page.
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