IVA Costs and Fees
Due to misleading advertisements or because they haven’t read the fine prints, many people think that setting up an individual voluntary arrangement is free. Those who have already gone through an IVA know that everything costs money; they had to pay the insolvency practitioner for example. After all, insolvency practitioners do not work for free! You should not imagine this as sending a separate check to your insolvency practitioner each month; basically all the costs are included in your monthly payments. How this works exactly and what are the differences between insolvency practitioners?
Setting up an individual voluntary arrangement is not free for anyone, but the costs and fees are calculated in a way that they should be affordable even for people who have financial issues. It is true that insolvency practitioners have a different fee, which is why it is important to look around before choosing one.
Most of them do not have any up front fees, this meaning that you will not have to pay anything in advance. Insolvency practitioners put up a lot of work until they set up an IVA: they prepare the documents, they set up the creditors meeting and finally, during the whole period of the IVA they are in close contact with you and your creditors, making sure that payments are made in time, and that the whole process goes as it should. At the beginning of the process they do not require any payments, but when they make the proposal; their fee is taken into account in the total amount you can afford to pay.
Nobody can give you the exact amount you have to pay, except the insolvency practitioner himself, but the prices are in the following range: nominee’s fee £ 2500 - £ 3750 + vat and for the supervisor £ 600 - £ 1000 + vat per year. The amounts usually total something around £ 9000 (including vat) during the whole process of the IVA. It is important to keep in mind that you do not have to pay these amounts at once! They are included into your monthly payments.
Another important note is that it does not matter what insolvency company or insolvency practitioner you choose, first you will pay all the fees and charges, and only then your creditors will be paid. This means that in the first few months of the IVA your creditors will not receive any money from you. This is another reason why it is good to choose an insolvency company which practices low fees: you might repay your debts quicker than you imagined.
The fees listed here are general, and they will differ according to each particular case. Generally speaking, the fees might be larger for a more complicated case and lower for a simpler one. It is important that you understand how much you pay and more importantly what exactly do you pay for. You will pay the insolvency practitioner for preparing every document required for your IVA, for setting up the creditor’s meeting.
After the creditors had agreed to accept the proposal, the insolvency practitioner will supervise the whole process (which usually takes five years), you will have to pay for that too. It seems normal that you will pay a little more in the first part of the process, and somewhat less when the insolvency practitioner only supervises whether you send your checks in time and distributes the money between the creditors.
In case of unforeseen you should not pay more than you agreed initially, but it might happen that there were fine prints on your contract which detail such cases. It is very important to talk through everything with your insolvency practitioner; he is the only person who is able to answer all your questions related to the individual voluntary arrangement and the costs involved.
Getting an IVA is not free! Companies who promise you such thing are definitely hiding something or they might even be a scam. A certain percentage of your monthly payments are dedicated to repay the insolvency practitioner’s work, but in normal cases you will not be asked to pay any up front fees!
Do not trust companies or insolvency practitioners which ask you for extra cash. The amount of the monthly payments suggested in the proposal should cover all the costs, so there is no reason to worry about them. If you do not understand why you have to pay a certain amount, just ask your insolvency practitioners, he will be able to explain you.