An Individual Voluntary Arrangement (IVA) is a formal, legally binding, debt solution that allows you to repay debts you can’t manage at an affordable rate.
This arrangement is a form of insolvency which is set up and managed by an insolvency practitioner (IP). As well as securing a payment schedule, an IVA allows you to write off up to 81% of unsecured debt using government legislation and can be an alternative to bankruptcy.
However, there are fees attached to an IVA and it’s important to be aware of these, and how they’ll be paid, before entering the debt solution.
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Do you need to pay for an IVA?
Regardless of who arranges your IVA, there will be fees attached which will cover the cost of the services provided by the IP.
IP costs can vary but on average these are typically in the region of £5,000.
This might seem like a lot of money, especially when you’re already struggling, but it’s important to know that any costs and fees will be included in your monthly debt repayments and taken from the creditors, meaning you won’t need to worry about arranging additional payments.
When do you have to pay?
IVA payments can vary depending on the provider.
Our partners offer free debt advice and will never ask for upfront fees before beginning to set up an IVA. You will only be charged a fee if it is approved by the people you owe money to – also known as your creditors.
As mentioned above, the cost of fees will be included in your monthly payments and taken from the creditors rather than your own pocket.
The IVA proposal will also offer the chance to start distributing a percentage of your payments from the third month of your arrangement. This means that any balances owed are reduced from the outset of the agreement.
In some cases, the people and companies you owe amend the terms of the IVA so that your insolvency practitioner is not required to make payments to them from month three.
How much is an IVA fee?
There are three types of IVA fees to take note of before signing your proposal. These fees cover the different roles of the IP during the arrangement.
Nominee fee: This covers the preparation of your IVA proposal, including reviewing your current
financial situation and offer of repayment to creditors. Admin and facilitation costs are also covered in the nominee fee, which normally costs a minimum of £1,000. By law, this work must be done by an IP and can’t be done on your own.
Supervisor’s fee: When your IVA is approved by the court, your IP takes on the role of supervisor. This means that they are then in charge of the ongoing management of the IVA – including collecting
and distributing your monthly repayments, handling any queries and annual review, and managing creditor relations. This fee can range from 15-20% of the payments made or, in some instances, may just be a flat fee.
Disbursements: These are payments made to third-party companies for support during the IVA. For example, this could go towards cover the cost of software licenses, insurances, and regulations that are required. This typically costs £1,200 per case. This fee could also include payments made for the provision of additional services to provide the best return for your creditors.
Which type of debt concerns you?
Catalogue & Store Cards
Is there a minimum IVA payment?
Monthly contributions towards an IVA are based on your affordability.
You could pay as little as £85 per month towards your debts if agreed by your creditors. However,
your creditors may be unlikely to accept your IVA proposal if you’re unable to pay a reasonable amount every month.
If you are unable to make the minimum monthly payment required, you may be better suited
to another debt solution, such as a debt relief order.
An experienced debt help advisor can help you determine how much you are able to afford to pay
each month by carrying out an income and expenditure check before beginning the IVA process.
How long do you pay an IVA for?
An IVA typically lasts for five years but this can be extended to allow you to make all agreed payments.
If you struggle to pay your IVA may be extended for an additional 12 months and if at the end of that extension you are still unable to cover the costs, your IP will work with you and your creditors to potentially extend the arrangements again.
It’s important to also be aware that you can also complete your IVA payments early should you
find yourself in a position to make a lump sum payment.
IVA fees when referred by the court
If you have been passed to an IP for an IVA during court or bankruptcy proceedings, you will be required to pay a fee.
You will have to pay £335 to the IP which will be taken from the deposit paid to the court for your bankruptcy.
Can I get help with the IVA cost?
Unfortunately, legal aid is not available for setting up an IVA. However, it’s important to remember that free debt advice is available when searching for debt solutions tailored to your needs.
Is it worth getting an IVA?
If you’re unable to cover the cost of your debt and are struggling to budget every month, an IVA is worth considering.
An IVA can be a positive way to manage unsecured debts of £6,000 or more, owed to two or more creditors.
Most unsecured debts can be included in an IVA, so if you’re worried about debts such as credit cards, loans, overdrafts or even council tax arrears, you could regain control of your finances with the debt help solution.
Available to people living in England, Northern Ireland and Wales, an IVA can help people with a steady income reduce their debts to one monthly payment of at least £85.
When considering entering an Individual Voluntary Arrangement, or any kind of debt solution, it’s important to find authorised and regulated advice. Experienced advisors can talk you through the amount you pay.
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