IVA : Who Pays The Bill For My Individual Voluntary Arrangement?

“Who pays the bill or fees for an Individual Voluntary Arrangement ?” is a very natural question to ask oneself, especially if you are considering using an IVA to become debt free.

There has been much debate over this subject recently so, as a result My IVA Adviser would like to lay out as clearly as possible how the fees for an IVA arise, and how they are paid.

But regarding the argument as to who it is that ends up paying them, we’ll leave that up to you to decide.

To begin with it should be understood that all IVA’s have fees - there are no exceptions. These fees are charged by the Insolvency Practitioner, the person who is responsible for setting up and administering the IVA case.

A Licensed Insolvency Practitioner (IP) is a professional accountant with many years experience within the insolvency industry. UK law states that only Insolvency Practitioners are allowed to administer IVA’s.

To provide the Insolvency Practitioner with the necessary support needed to prepare and then administer an IVA, the IP needs a sizeable staff, hence, they set up offices specifically designed to help them in their role and these offices are called Insolvency Practices.

All Insolvency Practices are run as commercial businesses, and no Insolvency Practitioners or Insolvency Practices provide their services for free, even as part of a charity.

If someone used the services of the CAB, CCCS, Payplan or the National Debtline, their case would be passed to a commercial Insolvency Practice and there would still be fees to be paid.

So there are no such thing as ‘fee free’ IVAs, irrespective of which company or IP you use.

Without doubt, creditors recognise the importance of the role played by the Insolvency Practitioner.

Without the formal structure of the IVA and a licensed Insolvency Practitioner in place to ensure the IVA is adhered to, the chances are that any agreement would flounder and fail. And this is one of the main reasons creditors accept the Insolvency Practitioners involvement in the first place.

The Insolvency Practitioner’s fees break down into two primary parts:

  • The Nominee’s fee: This fee covers all the preparatory work carried out for the IVA proposal, the document produced which outlines the individual terms of each IVA. The actual fee varies from case to case, but it is usually set to around the same value as 5 monthly IVA contributions.
  • The Supervisor’s fee: This fee covers the costs for the work the Insolvency Practitioner carries out over the full duration of the IVA, ensuring that the terms of the IVA are adhered to. This fee will also vary between cases, but as a rule of thumb it is normally about 15% of the amount recovered.

The fees are agreed by Creditors at the creditors meeting. But it is not unusual, however, for creditors to haggle on the level of fees the Insolvency Practitioner can charge, if they believe they are unacceptably high.

Creditors also allow the IVA’s fees to be taken from the IVA fund. This is the name given to the fund made up of the IVA’s payments that have been collected by the Insolvency Practitioner from the IVA applicant.

The payments into the IVA are preset to what is agreed as being an affordable level for the IVA applicant.

The Successful Completion of an IVA

    Under the successful completion of an IVA, when the IVA applicant has finished paying their agreed number of IVA payments into their IVA fund, and after they have released any required equity from their property (should they own one), a certificate of completion will be issued by the Insolvency Practitioner to the IVA applicant who will then be legally debt free.

    If there are any outstanding debts still remaining at this time they will be written-off. There will be no further payments to be made in relation to fees, as the fees will have already been paid from the IVA fund.

So, the argument ensues: Who bore the cost of the fees? Was it the creditors who allowed the fees to be taken from the recovered money from the IVA fund before they then wrote-off the outstanding balances, or was it the IVA applicant who paid the IVA fees from his contributions, but paid back less of their original debt and had more of their original debt written-off?

Perhaps we should let you decide.

But When an IVA Fails

    In contrast, however, it is important to realise that should a IVA applicant fail to complete the IVA through to its full term things will be different and take a turn for the worse.

    This is because the first money to be paid into the IVA fund will inevitably be taken by the Insolvency Practitioner for his fees. This money will not have been repaid to creditors and so the amount of outstanding debt will not have fallen by an equal amount to the money paid into the IVA.

    By failing to see the IVA through to the full term, the benefit of a debt write-off never materialises, so the original debt will still survive, with what might only be small reductions to the balance being made once the IVA fees have been taken.

    It is also possible that the creditors will instruct the Insolvency Practitioner to petition for the IVA applicant’s bankruptcy and any insolvency fees drawn by the Insolvency Practitioner up to this point will not be refunded to the IVA applicant or creditors.

My IVA Adviser is quite different from the mainstream when it comes to being an IVA provider.

We do not charge you any set up fees for preparation of your IVA application, ever!!.

Our pledge to you is :

If we do not manage to successfully arrange an IVA for you after telling you that we believe we can, there will be no charges or fees for you to pay.

Quite simply…

No Individual Voluntary Arrangement - No Fee

But there are some other IVA companies that will charge you fees, and this is how….

If your IVA is rejected by creditors they will bill you for the preparation work done on your IVA case, and even though you didn’t get your IVA, they will expect you to pay their fees.

In this situation you could be expected to pay perhaps 3 or 4 months repayment contributions. If you are making monthly payments of £350 per month, that could be a bill for as much as £1,400.

This is just further proof that making the right choice of IVA company to represent you is essential.

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