An Individual Voluntary Arrangement (IVA) is a legally binding agreement between yourself and your lenders to repay your debts over a fixed timeframe.
Whilst an IVA can provide you with breathing space from your creditors and some vital time to recover financially and begin making your repayments in a more comfortable manner, they nevertheless can be supremely expensive. This is due to the fact that you will require the services of an Insolvency Practitioner in order to set one up, and these legal officials necessitate that you pay a fee for them managing and facilitating your IVA.
The following page will provide you with all the relevant information you require about the costs of an IVA, so you can determine whether it is financially worthwhile to tackle your debt related problems.
Will I have to pay a fee to obtain an IVA?
In order to set up an IVA, you will need to pay a fee to a professional within the legal or accounting sector, formally known as an insolvency practitioner. You must have a presiding IP in order for your IVA to be formally declared in court, and they will be charged with processing and managing it throughout its duration. IP fees can often be expensive though the amount they charge will be dependent on the scale of work that they will need to undertake during your IVA. As of yet, there have been no official disclosures or professional guidelines about the amount an IP should charge, though typically you should expect to pay around £5,000 over the course of the agreements term.
How do I pay my insolvency practitioner and how do I go about doing it?
The manner in which you pay your insolvency practitioner and the dates you pay them is dependent on their practices policy. Certain IP’s will necessitate that you pay the costs of your IVA upfront before starting the process of setting it up, whilst others will take a cut from your monthly payments to your creditors as payment for their fees. The rest of the money will then be reallocated to your creditors, though this may act as a deterrent to your creditors when they are considering your application for an IVA.
Why am I paying a fee to my insolvency practitioner?
Whilst on an IVA, your presiding insolvency practitioner will be required to fulfil three services for your benefit. The fees you are charged are done so because you are essentially paying for them to fulfil these roles. These services are:
- Financial adviser – Your IP should give you financial advice during your IVA to make sure you keep up with your payments and should also give you an altruistic insight into whether you are well suited to using one.
- Monitor – After your IVA application has been accepted in the courts and your lenders agree to set one up, your IP will be tasked with monitoring your progress on it and helping you if any problems arise. You will have to make your monthly payments to your creditors to your IP, who will then be in charge with distributing it amongst your respective creditors.
- Nominee- One of the legal requirements to setting up an IVA is that you have a qualified IP in your service. The IP will be in charge of helping you formulate your IVA proposal, processing your application in the courts and arranging a meeting between yourself and your creditors so that they can decide whether to give you the green light. Only an IP can do this under the legal conditions of an IVA and you will not be able to process the application for one yourself, unlike many other debt solutions.
If you are someone who believes that an IVA can help with your financial situation, you should search round the market and ask a variety of IP’s for quotes about the fees they would charge you in order to have one set up. Shopping around will ensure that you acquire the most beneficial arrangement for your circumstances, and you should keep in mind that many IP’s come with hidden costs as well. As such, enquire about these during your initial consultation with an IP, so you avoid obtaining the services of a firm that could substantiate your financial problems in the future, rather than address them.
Certain IP’s might decide to provide you with a free or low cost initial consultation so they can discuss your financial situation and determine whether an IVA is well suited to you. It is worth looking around the market and identify firms which provide deals such as this, because you will likely want to economise on your immediate spending if you are someone looking to set up an IVA.
Costs you’ll pay if your referred for an IVA by the court
If you are referred to an IP by the court in order for them to have an IVA set up for you whilst you are undergoing bankruptcy, you’ll be required to pay a fee of £335 to the IP.
This fee will be subtracted from the total of the deposit you gave to the court when you sent them your bankruptcy petition.
Deciding on an IVA
- How does an IVA work?
- Which debts can I include?
- How much does an IVA cost to set up?
- Income and Asset Requirements
- How an IVA will affect homeowners
- How an IVA will affect your bank accounts and pension
- How an IVA will affect your credit rating
- How an IVA will affect your work, home and assets
- The lasting power of attorney
- Is an IVA the right solution for me?