Just who does pay the IVA charges

[dougal78]

Hi All,

Just thought I'd get peoples opinions on the advertising that IVA companies use. Nearly all of them make a statement "you do not pay our fees, your creditors do"

Well my debt stands at about 26k...now what with pay rises and some refunded bank charges by the end of my IVA I will have paid out over 31k...

My question is if I'n not the one paying the charges where is that money going?
I think the claims made by some of these companies are very suspect

[MelanieGiles]

Hi Dougal and welcome to the forum

The fees charged by your insolvency practitioner are deducted from the money that you pay over, with the agreement of creditors who accept the balance. To this end you often find that insolvency practitioners (I do it myself) confirming that fees are payable by your creditors - but of course those fees could not be payable unless you pay over your contributions. In the case of a full return to creditors, additional contributions would have to be made to cover the IP costs, in which case the debtor would be held to be paying the fees.

In your case, you are clearly offering to pay a substantial amount back to your creditors - which appears to be more than you originally owed. One wonders whether you chose the best option, however you have had the benefit of an interest freeze which should be considered when evaluating the costs.

[Reviva UK]

Hi Dougal
you may like to check out the advertising standards website - link below ;

http://www.asa.org.uk/asa/adjudications ... _42567.htm

where debt free direct were taken to task about the claim that it won't cost you a penny. The response may help you understand who pays what.

I am however aware of a couple of IVA companies who charge up front fees (equivalent to 2 or 3 months IVA contributions ) before the creditors meeting and even if the iva is not successful. This I believe will happen more and more because the banks are not playing ball and 2007 was a particularly difficult time for people in debt who had IVA's rejected.

Many creditors are putting pressure on the IP to reduce fees and I have seen Nominee fees reduced to £800. They actually can't afford to do it for this. especially when you look at the company acounts and you see that the cost of acquisition for an IVA ( for a big well advertised company) well over £750. If you then add on the incentives they offer introducers it becomes scarey.

This actually ties up with a pet hate and that is the current system for folks with the well advertised £15k of debt who go into an IVA pay about £250 per month. It would be usual for the IP to receive more than the creditors.

I can't wait for the new SIVAS to come into play and that should reduce some of the costs and make the process better for everyone.

[size5]

I have seen those companies also, at least 2 of which have been known to post heavily on this site. My advice is always the same, go to www.iva.com and have a look round, always get more than one opinion and never pay upfront fees.

[MelanieGiles]

I would never seek any monies up front from a client - but we do ask for the first contribution to be paid priot to the creditors meeting as a gesture of commitment and good faith. These monies are fully returnable in the unlikely event that the IVA is not successful.

[Reviva UK]

Hi melanie

wasn't suggesting that was you at all - one wouldn't last 5 minutes on this site if what you did wasn't completely transparent.

Occasionally we might see a client that is adamant that they want an IVA and not B and are confident that they can pay £x per month. If we have any doubt at all about their ability to manage an IVA before formally committing to it we often suggest they try it for themselves for a few months.

if they come back and say that they couldn't manage the payments ( into their savings account not mine!) they often need a serious rethink. Little like a try before you buy approach.

Need to ensure that the creditor pressure is handled properly so things don't get worse.

[MelanieGiles]

Didn't take it that you were directing your post at me Paul! Just wanted to give the perspecive from an IP point of view.

I too have seem some terrible cases where clients have been referred to me sometimes having paid five ir six "up front" payments to their IP for nothing.

I have also operated a similar scheme for my own clients that you suggest, and it works very well expecially with trading businesses who have not been used to setting money aside from their trading profits. If I can see three clear months of disposable income saved, it gives me confidence that the IVA will work - even if it does take a little longer to propose!

[North East Derbyshire CAB]

I have seen those companies also, at least 2 of which have been known to post heavily on this site. My advice is always the same, go to www.iva.com and have a look round, always get more than one opinion and never pay upfront fees.

size5 - we note with interest that you advise posters to go to www.iva.com

We may be mistaken, but isn't this the same organisation that has been the subject of a couple of newspaper articles, including one in yesterday's Independent on Sunday.

Just wondering in your professional opinion, would you say that this organisation is a true recognised independent body?

[size5]

I haven't seen the article in question so it would be inappropriate for me to comment.

I find that iva.com is a very useful tool for people who are considering IVA's to have a look round and read real peoples reviews on the level of service given from a number of different companies.
I am sure that there are links that you can follow through the site, but that is the same everywhere so on balance I would say that researching different companies via that site is a good thing.

Thanks.

[aguise]

Hi I feel the same as size 5. It is at least somwhere for people to find Ip,s in their area and to read reviews. I posted my review on there and there was a mistake I contacted them and it was immediately put right. I am interested in the article you have mentioned though, what did it say.

Ang

[North East Derbyshire CAB]

Hi aguise, just wondering if you and size5 for that matter have had chance to read the article in the Independent on Sunday?

If not, here is a link to it: http://www.independent.co.uk/money/inve ... 83221.html

Also we have found the other article (timesonline) from 2007: http://business.timesonline.co.uk/tol/b ... 290482.ece

Perhaps you and size5 may wish to take a look at the above articles and pass further comments and opinions?

[size5]

Thanks for the link.

Having read the first article, I can only refer you to the answers given by IVA.COM in your other thread re Sunday newspapers. The article itself I found to be aggressive and biased against IVA providers, eg IP's worried about their nice little earners. I would also point out that the views expressed are those of the individual journalist himself and he is quite entitled to his own opinion.

The 2nd article is something that I feel you would be better off asking the question directly to IVA.COM themselves, I can only re-iterate that if someone is looking at an IVA then in my opinion it will do them no harm to have a look at all the various reviews on there and come to their own decision.

Thanks.

[Skippy]

I've had a look at the articles and I must admit that I find it hard to believe that anyone who was unsure about an IVA would be swayed by £50. The article came across as very biased - some of the wording was very OTT.

I don't really know what to say about the second article, other than it's over a year old, and only IVA.com can comment.

[Reviva UK]

Hi

I haven't had much exposure to iva.com but I think it is a very good thing to show people that they should "SHOP AROUND" for their debt solution in the same way they do for everything else.

One has to remember that 5 years is a long time and the debtor ( I do hate that industry word!) and the IP have to work together to get through the process. You have to be 100% confident that the relationship will work otherwise speak to somebody else. You are only bound once the proposal is finallised - however i wouldn't recommend trying to find the "cheapest solution" with the lowest monthy payments as this will probably be rejected and the IVA co is more likely to have fewer IP's per client that other companies. You get what you pay for ( sometimes!)

In my experience I only see the IVA's / relationships that haven't worked out and so I don'e see that many iva success stories. But it is a huge majority of cases that are successfully completed.

CASE

we saw an elderly couple ( in 70's) last week who have a house worth 250k with a mortgage of £120k, they have 50k of unsecurd debt and £500 pm disposable if they didn't pay the debt.

The problem for them is that £500 pm is not sufficient to meet the minimum payments so they were really worried and called us - referral from a friend.

We found that they were already in an IVA - which required them to release £50k plus fees plus interest from the property. They were supposed to have completed this by April 08 otherwise they would technically be in breach of the IVA.

The IP has now contacted them to request that the house be sold at auction to complete the IVA commitment.


As I say I only see the minority cases and sometimes these are horrendous.

This couple had several options but Bankruptcy or IVA were not appropriate. We will be simply refinancing the house ( affordable with the disposable income) and paying off the IVA etc. This has really shaken the couple and they are in a dreadful state.

The moral of the story ( sorry to go on for so long) is;-

1. CHECK YOU CAN WORK WITH THE IVA COMPANY
2. READ THE CONTRACT AND ENSURE YOU UNDERSTAND IT
3. GET A 3RD PARTY TO READ IT AND ENSURE THAT IT SAYS WHAT YOU THINK IT SAYS.
4. IF NOT GET IT CHANGED OR MODIFIED BEFORE YOU AGREE
5. IF IT IS NOT WORKABLE FIND SOMEONE ELSE.


HOPE IT HELPS

[North East Derbyshire CAB]

Hi all,

Thanks for the reply Size5 and nice to read your comments Skippy.

Paul, we have read through a number of your posts of late and feel that in general you give a good balanced opinion on the topics debated on this excellent forum.

To be fair to all we also really only see clients who have problems with IVAs and would accept that there must be a large number that are also successfully concluded.

With regards to your moral of the story paragraph, we would generally agree especially on number 3.