For people who are in debt, it is only natural that you might be worried about how much an IVA - or Individual Voluntary Arrangement - might cost. So, let’s break down the costs of an IVA, looking at who pays what and what it all contributes to.
The Cost of IVAs: Who Pays for an IVA?
When it comes to the costs of an IVA, there are two main aspects to consider - the debt solution itself, and the fees that come with it.
Who Pays for the Debt?
It is the individual themselves who will have to pay for the IVA to be set up and make each monthly payment on time. These payments will be tailored to how much you can afford to pay each month, contributing towards your debts, before being written off at the end of the IVA.
Who Pays the IVA Fees?
Typically, it is the creditors who pay the fees associated with an IVA. Each month, you will pay the insolvency practitioner a set amount. The insolvency practitioner will then take their fees from the payment, and send the rest to the appropriate creditors. Thus, the fees are essentially paid straight from your IVA fund, which means that, in essence, it is the creditors who foot the bill. However, if your circumstances change, and you can afford to pay more to your creditors, either because you receive a windfall, like inheritance, or your income significantly improves, then you will be required to pay more into the IVA, and may end up paying your debts in full, plus the fees.
How Much Does It Cost to Set Up an IVA?
The cost of an IVA largely depends on the complexity of your circumstances, and takes account of the level of debt you have, how much your monthly repayment amounts to, the creditors you owe, and the insolvency practitioner you work with. As an IVA is a legally binding contract, you must go through an insolvency practitioner, and pay their fees, in order to get an IVA. If your circumstances are more complex, then the fee will be higher, as more work is required by the insolvency practitioner.
Your monthly repayments are calculated based on the amount of disposable income you can afford to pay each month, after taking out all other essential payments. In other words, your IVA payment will be based on the amount you can afford to pay each month. If you ever find yourself unable to pay towards your IVA, you can request a payment break until you can afford to resume regular payments.
When and how you have to pay the costs depends on the insolvency practitioner. Some will require you to pay upfront towards the Nominee fee, whereas others will just take it out of your regular monthly payment. Here at NDH Financial, we do not charge any upfront fees, and will only take our fees from payments you make into your IVA.
Windfall Clauses and Bankruptcy
If your IVA has a windfall clause, you will have to pay any money that you unexpectedly receive during the period of time you have the IVA. This includes things such as inheritance,, lottery winnings, and reimbursements from the tax rebate process. Outside of the windfall clause, if you receive more income than originally expected, you may be asked to contribute 50% of the extra amount into the arrangement.
If you have been to court for bankruptcy proceedings and have been referred by the court to an insolvency practitioner for an IVA, you will be required to pay a one-time standardised fee of £335 to the insolvency practitioner. This fee will automatically be taken out of the deposit for the bankruptcy application that you paid to the court.
Getting a Quote for an IVA
You can shop around and ask insolvency practitioners for an estimate or quotation for their work, so you can compare the costs. It is important to not only look at the cost, but the additional benefits of working with each company, as this can have financial implications in the future.
With NDH Financial, we aim to make our IVA services as affordable and accessible as possible to all. We will never charge you any upfront costs, and our fees are in line with the industry standards. You can also benefit from a free, no-obligation initial consultation.
What Do the IVA Fees Cover?
The cost of the IVA is split into three parts. There is the Nominee Fee, the Supervisor fee, and expenses. In some cases, an insolvency practitioner may charge an Advisory Fee, however, this is outside of the costs of the IVA.
Before you sign up for an IVA, your insolvency practitioner will review your circumstances to determine available solutions, so that you can be sure you are proceeding with a solution that is appropriate for you. This might also include things such as approval test costs, which will let you know if you could get approved should you choose to go down this route.
At NDH Financial, we offer free, no-obligation online debt advice, and will never charge any upfront costs, making the process as affordable and accessible as possible.
During the initial stages of the IVA, the insolvency practitioner acts as the Nominee, and is entitled to a Nominee fee. The Nominee fee covers the setting up and preparation of your IVA. This includes assessing your current financial situation and your repayment offer to creditors, issuing the Proposal to your creditors, the administration and facilitation of the creditors’ decision process used to consider the IVA, and any negotiations with creditors during this process. This fee is usually based on a fixed amount, which may vary depending on the level of work required in preparing your proposal.
Your insolvency practitioner will supervise your IVA once it has been approved by your creditors and is then entitled to draw a Supervisor fee. The Supervisor fee is based on the ongoing administration of the IVA which includes collecting and distributing your monthly repayments, dealing with any queries raised by you or your creditors, completing an annual review of your financial circumstances, reporting annually to you and your creditors about the progress of the IVA, and dealing with the closing formalities. This fee can either be based on a fixed amount, based on a percentage of the funds paid into the IVA, or a mixture of both.
The expenses are costs paid by the insolvency practitioner to third party companies that are required as part of the arrangement, for example, statutory insurances, software licence, document portal, postage and the registration fee to register the IVA with The Insolvency Service.
The overall costs that will be paid out of the IVA are subject to creditor approval. Creditors may agree to approve the fees on the basis of the proposal, or they may request their own fee structure. Common fee structures requested by creditors in simple cases usually involve a fixed total fee cap of £3,650 for Nominee’s fee, Supervisor’s fee and expenses, with additional 15% of additional realisations outside of the monthly contribution; or a fixed fee of £1,000 for the Nominee fee, and a Supervisor’s fee based on 15% of the amount paid into the arrangement.
For the majority of IVAs, the total fees will be approximately £2,500 to £4,500, although this depends on your circumstances, and the fees agreed with your creditors.
Outside of the IVA costs, you may incur an additional cost if an application to court is required. If you require an interim order, to stop creditors continuing with legal proceedings or a bankruptcy petition, or want to apply to have your details omitted from the insolvency register due to the risk of violence, then you will be required to pay the court application fee, directly to the court, before you can proceed with the IVA.
Thinking About Going Ahead with an IVA?
Before making any large financial decisions, it is important to discuss every aspect of debt with an expert to see which debt solution might be the most suitable for your needs. At NDH Financial, we make the process as transparent as possible, steering clear of using technical jargon that can be difficult to understand.
This is why we offer a free, no-obligation consultation, providing you with online IVA consultation. You can also visit our Learning Hub where you will find a variety of guides designed to help you make an informed decision about your next steps.
So, if you are thinking about going ahead with an IVA, get in touch with NDH Financial today.