How much does an IVA cost to set up?
Summary: This article aims to clarify the fees associated with an Individual Voluntary Arrangement (IVA), including the initial setup costs and the ongoing cost.
How much does and IVA cost to set up?
An IVA is set up usually with the assistance of an Insolvency Practitioner (IP), who acts on behalf of the debtor and is a 'go between' to the creditors. The initial stages of an IVA can take up a lot of time in preparation, planning and negotiating with the creditors to get the best deal. Therefore, it is usual for the IP to charge what is referred to as a 'nominee' fee. It is difficult to put an exact figure on this amount, but it could be up to £1,500.
How much is the ongoing cost of an IVA?
In order for an IVA to be maintained, the debtor would usually appoint an IVA Supervisor to collect the monthly payment and forward to the relevant creditors, as well as act as an advisor if there are any questions, this is usually the same IP that sets up the IVA. As with the nominee fee, this can vary, but it is usual for an annual fee of between £400 and £800.
How is the ongoing cost of an IVA calculated?
When the IP meets with the creditors to put forward the IVA proposal, they will have calculated a repayment amount that is affordable for the debtor. The IP will also propose an amount that will be their fee. As the ongoing fee would be taken from this payment, not added to it, the creditors must decide if it is an appropriate amount as it will affect the total amount of money they will get back. If they feel it is too high, then they may refuse the IVA, and so the IP will need to negotiate with them to finalise how much they will get.
Who pays the IVA fees?
Both the nominee fee and the ongoing fees are taken from the monthly payment calculated by the IP and agreed by the creditors. Therefore, it is logical to assume that the fees are paid by the debtor. That said, as any outstanding debt is cleared at the successful completion of the IVA, it should be seen as a worthwhile investment. However, should the IVA fail for any reason, the debtor will be back in the same position as they were before the IVA began, and any fees taken from the monthly payments made will be at their expense.