Matthew,
We'd agree that it is rare that someone with £7,500 of debt is suitable for an IVA. But there are times when it works.
The principal reason why IVAs at this level are not possible at this level is fees. The fees charged by most IVA providers are too high to make a VA a sensible solution for either debtor or creditor.
We’ve set out to be a low-cost and fully transparent IVA provider: You can find full details of how we charge at
http://www.cleardebt.co.uk/cd_detail_1. ... id=132#149. <
http://www.cleardebt.co.uk/cd_detail_1. ... id=132#149.>
Essentially, for a debt of between £7,500 and £15,000 we charge a fixed nominee’s fee (the fee for setting up the IVA) of £750. We then charge a fixed supervisors fee of £500pa (on any amount of debt). This level of fee makes a real difference to the viability of an IVA in low-debt cases. Here’s a recent, real example where someone had gone to the supplier we think of as closest to us in fees and had been turned down for an IVA:
ClearDebt
Total owed £8,850
Surplus £175
Fees, costs/ 5 yr IVA £4,171
Dividend to creditors 71p/£
Competitor
Total owed £8,850
Surplus £175
Fees, costs/ 5 yr IVA £8,578
Dividend to creditors 21p/£
We’d agree that, in most low-debt cases, better budgeting, DIY debt-management (or even, sadly, bankruptcy) could be better solutions to debt than an IVA. But that is not always the case, often because providers don’t think of offering anything other than a five year VA. In low-debt cases, where the debtor has a reasonable surplus, a three year VA might be less costly and offer a return creditors would accept. Assuming the surplus above, and our fee/cost levels, the example above could have yielded 36p/£ over three years: creditors would probably have pushed for a five-year VA, but we could have got away with shorter, especially if creditors begin to take the view that debtors will be more likely to complete a shorter VA.
Yours,
Andrew Smith
ClearDebt
www.cleardebt.co.uk
