who really pays IVA fees

[go_4_broke]

Here's a quote from a popular commercial 'debt help' website (ok IVA seller) -

'The main reason why IVAs are so popular with both creditors and debtors is that the fees tend to be less than the court costs and Official Receiver fees involved in a bankruptcy'

This seems to me to be absolute cobblers with basic bankruptcy court costs/OR fees around the £500 mark. A further example from The Times, Feb. 24th 2007:

'IVA firms typically charge £3,000 plus £900 to £1,000 a year, taken out of the debt repayment, leaving the banks with sometimes only 10 or 20 pence in the pound.'

This seems to be suggesting that out of, say, a 40p in the pound IVA, I pay 40p in the pound and the creditors get whats left after fees are deducted. Not true surely ? I pay 40p in the £ PLUS IP fees don't I ?

Many Thanks !

[go_4_broke]

I wouldn't normally reply to my own questions but this one seems to have got a bit mangled in the posting - I've reconstituted it below;

Question - who actually pays IVA fees ?

Here's a quote from a popular commercial 'debt help' website (ok IVA seller) -

'The main reason why IVAs are so popular with both creditors and debtors is that the fees tend to be less than the court costs and Official Receiver fees involved in a bankruptcy' (!!!)

This seems to me to be absolute cobblers with basic bankruptcy court costs/OR fees around the £500 mark. A further example from The Times, Feb. 24th 2007:

'IVA firms typically charge £3,000 plus £900 to £1,000 a year, taken out of the debt repayment, leaving the banks with sometimes only 10 or 20 pence in the pound.'

This seems to be suggesting that out of, say, a 40p in the pound IVA, I pay 40p in the pound and the creditors get whats left after fees are deducted. Not true surely ?

I pay 40p in the £ PLUS IP fees don't I ?

Many Thanks !

Hope this makes (slightly) more sense. . .





New to the forums - but not to debt !

[Welsh Boy]

Hello sled

Welocome to the forum. The main reason IVA`s are popular are basically because they are a very good product, administered properly they give peace of mind to those of us with debt worries. The topic of fees in my opinion is of secondary importance, the fact of the matter is we need qualified professional help and should have no qualms in being charged accordingly. There are othet associated costs that go along with each route of resolving the debt problem in the best way for the client, but my take on it is IVA`s are popular because in the right hands they are a good product.
Tony

[go_4_broke]

I should have added that the correct title should have been 'Who really pays IVA fees' but I think this got lost in the wash as well. I can see I'm going to have to repost this. . .

New to the forums - but not to debt !

[MelanieGiles]

Hi

I think you are misinformed about costs in bankruptcy, which are actually significantly higher than £500. The £500 you quote is for the bankruptcy application itself. Once a case has been referred to the Official Receiver, the DTI takes 17% of all asset realisations over £2,000, the Official Reciever charges a flat fee of £1,625 and then you have the Trustee's own costs to contend with!

I am not actually sure what point you are making in this post, but you are correct in assuming that a 40p dividend is 40p after the costs of the IP have been taken account of.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[go_4_broke]

Hi Melanie and thanks for your reply.

As I said the whole thing has got a bit mangled, but my main point was that the 'Times' article could be seen as suggesting that out of, say, a 40p in the £ IVA, after fee deduction 'only 10 or 20 pence in the pound' would be be left to service the debt.

This suggests that fees are taken 'in the margin', whereas I am assuming they are taken 'on top', that is to say a 40p in the pound IVA actually costs 40p in the pound PLUS IVA fees.

In terms of bankruptcy charges I am assuming a very basic case with no assets to realise. I can see that in a more complex case there would be substantial charges. However it is interesting that the IVA charges don't appear to vary much in either case making it a very different proposition for a debtor with or without assets.

You mention some of the OR/DTI costs, I wonder if you might know this: in a bankruptcy case where the debtor is in a position to contribute from income and the OR asks for a percentage of income above the agreed minimum, what the normal percentage is ?

Many Thanks !

New to the forums - but not to debt !

[MelanieGiles]

Hi Go 4 broke

The Times article was misinformed. The average return from IVAs generally is approximatelt 32p in the £, with a minimum dividend generally acceptable of 25p in the £. IVAs will not work if dividends are as low as 10 to 20%.

You refer to fees on top! We refer to fees being paid by creditors. The debtor would have to pay the same level of contributions, whether the IP charged fees or not, so it is the creditors who suffers the costs of the IVA or bankruptcy. I appreciate that you can look at this from both ways, and that in the case of 100p in the £ returns it is actually the debtor paying for the costs.

The OR tends to work on a sliding scale with regard to Income Payments Agreements and Orders in bankruptcies. Generally they look for between 60% and 100% of disposable income - depending upon circumstances. A married man with three children might get the the lower, a single person living at home with parents might get the upper. It is curious that this is entirely at the discretion of the Official Receiver, with no creditor input, and it is definately not worked out on the British Bankers Association rulings that seem to be so popular with creditors at the moment - and which are downright impractical!

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[go_4_broke]

Melanie

Thank you for that extremely comprehensive answer !

Do you happen to know if the BBA rulings are in the public domain somewhere?

Best Regards

New to the forums - but not to debt !

[MelanieGiles]

For some very curious reason, everyone I seem to speak to in creditors circles seems very reluctant to divulge the information - although they are quite happy to refer to it when seeking to modify my client's payments upwards.

It is not available within the public domain, but I have a copy! I am away for a few days over the weekend, but will post a blog to my site next week detailing the information being relied upon.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[go_4_broke]

Many thanks Melanie, that would be very interesting !

New to the forums - but not to debt !