what is an IVA and what does it cost?

[Monica]

WHAT IS AN IVA?
An IVA or Individual Voluntary Arrangement is a legally binding agreement with creditors allowing someone who is in financial difficulty (usually debts of £18,000 +) to make a formal proposal to settle his/her debts. The suitability of the IVA solution will depend on individual circumstances but
the repayment proposal is always based on what you can afford to pay.

* the IVA allows you to be debt free in 5 years.
* a single affordable payment is made each month for 60 months
* your creditors must freeze all further interest or charges.
* once the final payment is made, creditors agree to legally write off any outstanding debt
* creditors can not demand increased payments
* the IVA is discreet and does not damage career prospects.
* current and future CCJ’s overturned
* protection from court action by creditors

however, think before you leap!
* the IVA will be recorded on your credit file - you will not be able to take further unsecured borrowing for the period of the IVA.
* it may take some time for your credit rating to repair once the IVA is completed
* if you are a home owner, during the course of the IVA you may have to release available equity from your property
* Usually any extra that you earn, above your declared amount when you took out the IVA, you will have to pay 50% to your creditors.

WHAT DOES IT COST?

The IVA agreement is not undertaken for free. You will need to use a specially licensed person called an insolvency Practitioner to undertaken an IVA. The Insolvency Practitioner will normally charge two fees: A Nominee Fee and a Supervisor’s Fee. These fees vary but as a guide, most Insolvency Practitioners charge a Nominee Fee of £2,500 and annual Supervisors fees of £1000.
NOTE: You will not normally be expected to pay these fees directly yourself. IVA fees are usually taken from your standard monthly payments. As such, you will not be asked to pay additional fees over and above your agreed monthly IVA payment.

Confusing? [:u] Consult the experts - they are here to help [:)]

[ClearDebt]

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ClearDebt
www.cleardebt.co.uk

[ClearDebt]

Just a note to follow on from the fees and costs described in Monica's post above.

We think she's quite right about the average nominees and supervisors fees. But we'd love to hear from anyone who is prepared to tell us what was actually charged in their IVA - because we believe many organisations charge a lot more and that this can mean:

• Less for creditors
• More pressure to squeeze the last drop out of a debtor's surplus
• Risk of miss-selling if an IVA firm gets more out of setting up an IVA than from seeing it through to its conclusion

ClearDebt was set up specifically to challenge this high fee culture: we've been able to do this by adapting world-class manufacturing process design to the professional world.

We offer IVAs to suitable debtors who owe more than £7,500. We charge a fixed nominee's fee of £750 for debts under £15,000 and £1,250 for all higher debts. Our supervisor's fee is £500 pa - which means we make at least twice as much from ensuring an IVA goes all the way than from setting it up in the first place - we have no incentive to put people in IVAs if it isn't suitable to their needs. Frankly this is both an ethical and a commercial consideration for us.

As Monica rightly said, fees do come out of your monthly contribution (determined by your income and necessary expenditure and different in every case) - so you won't really notice them. But, you should, for the reasons stated above and because high fees can make a real difference as to whether your creditors are prepared to vote "Yes" to your IVA.

If you are prepared to post here concerning the costs of your IVA, I'm sure this would be hugely helpful for those who are considering their own arrangement.

Andrew Smith

ClearDebt
www.cleardebt.co.uk

[MatthewHolt]

To be honest the fees of an IVA vary greatly from case to case.

We have had clients whos fees have been £5,000 in total including Nominees Fee.

On the flip side we have cases where the fees have exceeded £15,000 in total.

The matter of fees depend soley on the co-operation of the debtor and also the creditors.

If everyone claims and the client pays each month without fail the costs are minimal but on the other hand if they never pay need to be chased all the time or we have a difficult time chasing claims in then the costs can spiral out of conrol.

Supervisors fees tend to be charged on a time cost basis. So it can swing either way

[ClearDebt]

I'd really like to see this fees issue come right out into the open. Yes, as a self-confessed low-cost provider we've a vested interest in this, but i do believe more competition in the IVA market would benefit both debtors and creditors. We are surprised by the very wide variations we've found and by the number of debtors who have little idea of how much is coming out of their pot to pay the IVA-arrangers.

As Matthew suggests, supervisors fees are a real bone of contention, but we do believe fewer providers are chargingh on a time cost basis and more on percentage of recoveries these days.

Yours,

Andrew Smith

ClearDebt
www.cleardebt.co.uk

[MatthewHolt]

Your talking about the whole DFD thing of 40% of realisations.

We don’t charge on this scale and we have dealing with other IP’s and to be honest Haines Watts and DFD are the only firms I know that do on this scale. And even then Haines Watts only use it as a last resort.

[ClearDebt]

40% of realisations - that's what Debt free direct charge as a supervisor's fee. Are you sure? Why do creditors agree?

Andrew

ClearDebt
www.cleardebt.co.uk

[MatthewHolt]

DFD charge total fees of 40% of total realisations. I used to work for an IP who worked there.

I think if they are high payers then its not that much. Its more a case of they will never charge more than 40% of realisations.

It was something to do with KPMG that they started doing it. At times they were doing Nominees fees at £50 to stick to the 40% rule. This is 18 months ago im not sure if its still the same.

Of course being a public floating company its numbers they need to show for the shareholders so I would assum that will take priority over revenue.

We have had our fees capped by KPMG on the odd occassion to bring total fees to 40% of total reciepts over the 5 year period.

But of course if and when required IPs vary the terms to bypass mods like that.

[neverending]

I am two years into my IVA and have paid in a total of £8250,costs so far have been £2500 Nominees fees and £2100 supervisors fees plus £526 disbursements etc.
I am £1350 in arrears and my supervisor has propossed to increase my term by 15 months at £550 a month.
The original creditors totalled £57,817 and now stand at £64,023
Seems totally unfair to me to increase my total payments by £6600,am I being abused ??

[Oliver]

Hi Neverending

The first thing to say is that you mention that since going into your IVA, your debt has increased from £57,817 to £64,023. This seems very strange. When you enter into an IVA, all interest or charges are frozen by law. As such, it would be highly unusual for your debt to increase by anything over the 2 years you have been in your IVA. Are you sure it is an IVA that you have and not an informal repayment plan?

Given that you do have an IVA, it is always difficult to comment when the full facts of the case are not known. However, from what you have said, over 2 years you have paid £8250 into your IVA. You now have arrears of £1350. I therefore assume you should have paid a total of £9600 over the 2 year period. Dividing £9600 by 2 years suggests that you should be paying £400/mth into your IVA.

On the face of it then, over the course of your IVA as origionally agreed, you would have repaid 60 months x £400 = £24,000. Given that you say you owed £58,000 this looks to be a reasonable deal for you.

I understand that as you have fallen into arrears, your IP has suggested 15 extra payments of £550. Not having any other details about your case, it is impossible to comment whether this is reasonable or not. However, based on the analysis above, 15 x £550 = £8250. As such, your total repayments to your IVA will be £24,000 + £8250 = £32250.

Given that this is still far less than your origional debt of £57817, it still seems a reasonable deal to me. Have I missed anything?


You can access Video Clips giving additional information about IVAs at:
http://www.thomascharles.com/interview_ ... an_iva.asp

If you would like more information about IVAs, other debt solutions, or just want to arrange an informal chat, please visit us at www.thomascharles.com.

Best Regards
James Falla
www.thomascharles.com

[neverending]

thanks for the reply
The agreement is actually £450 x 60,but I had a variation in year 2 to pay £350 year 2 followed by £450 year 3 and final two years at £500.
The differing total debt is due to a lease on a car that i estimated at 5k but came out at 10k as the car was returned 2 years early they still charged the full term,even though the car was worth more than if it had gone the full term.
My supervisor has proposed this extra term without consulting me,and when i spoke to them today they said that there was no time to consult me as the 2nd year report was due.
I stated that I would rather pay £550 year 4 and £650 year 5.
Seems so unfair to pay an extra £8250 for £1350 arrears !!
I feel that they are more interested in an extra £1200 fee for the extra year.
Would be grateful for your advice
Andy

[Oliver]

Hi Andy

Its difficult to comment on the specifics of your case as clearly I do not have all the detail. Unfortunately, once you are in an IVA, it is down to you and your IP to agree the way forward. Other IPs wil be reluctant to try to advise or get involved because they know that they have no influence.

If you feel aggrieved with your IP, then you should first suggest to them that unless you have an opportunity to resolve your issues, you will lodge a complaint with the IPA (Insolvency Practitioner's Association). The IPA is a recognised professional body whose purpose is to inform and regulate Insolvency Practitioners within the UK and Ireland. You can find them at: http://www.insolvency-practitioners.org.uk/

Normally no IP will want to wind up with the IPA on their back so just your threat of involving them might change their attitude. However, if not, you should go ahead and speak to the IPA and lodge a complaint.

You can access Video Clips giving additional information about IVAs at:
http://www.thomascharles.com/interview_ ... an_iva.asp

If you would like more information about IVAs, other debt solutions, or just want to arrange an informal chat, please visit us at www.thomascharles.com.

Best Regards
James Falla
www.thomascharles.com

[sean]

A comprehensive and detailed explaination of the Individual Voluntary Arrangement (IVA) is provided via the Myvesta UK Educational Video Series.

See: http://myvesta.org.uk/media/video/iva/
See: http://myvesta.org.uk/faq/faq_iva_uk.html



Kind regards

Sean
http://www.myvesta.org.uk

[Oliver]

Sean

My understanding of the theme of this post is that it revolves around someone who is already in an IVA but now feels that the IP involved has not acted in their best interest. In the event of a complaint about an IP needing to be raised, in my exp[erience many people in IVAs just do not know where to turn.

The advise I normally give is to contact the IPA (see previous post). Have you any additional suggestions?

You can access Video Clips giving additional information about IVAs at:
http://www.thomascharles.com/interview_ ... an_iva.asp

If you would like more information about IVAs, other debt solutions, or just want to arrange an informal chat, please visit us at www.thomascharles.com.

Best Regards
James Falla
www.thomascharles.com

[sean]

James the post appears to have been started by Monica with the title "What is an IVA" Can you clarify the point you are making ?

Thanks

Kind regards

Sean
http://www.myvesta.org.uk