How much does an IVA cost
By law, every IVA must be administered by a licensed Insolvency Practitioner or IP as they are generally referred to and, quite simply, all IPs charge fees for their services.
Understanding these costs is an important element to entering into an IVA.
So let's start by looking at what the costs are for, then look at how much they are and who pays them.
What Are The Costs For?
The costs cover the legal charges and general disbursements that are associated with entering an IVA, along with the IP's fees for services rendered. Their role in the IVA process is significant.
They must prepare the IVA proposal, whilst verifying the information in it is correct. They also act as chairperson at the Creditors' Meeting ensuring proper procedure is followed.
They then supervise the IVA for its full duration, ensuring all obligations undertaken are being upheld by all parties.
They also undertake responsibility for monitoring and collecting the IVA contributions and the dispersement of payments to creditors.
And finally, it's the IP's responsibility to bring the IVA to a close by completing the necessary paperwork and notifying the Court of the IVA's successful completion.
Do charities charge IVA fees?
All IVAs must have a licensed IP to administer them and all IPs charge for carrying out their duties as listed above.
Please Note: There are no exceptions - and even IVAs provided by charitable organisations such as the Stepchange and Payplan will charge the same level of IVA fees as other IPs.
Free IVAs provided by charities is a myth.
Where will I see the IVA costs?
The costs will be detailed in the IVA proposal, where the IP highlights to all parties how much they intend to charge for administering the IVA, whilst stating how and when they intend to draw their fee.
Creditors negotiate the level of fees with the IP as part of the Creditors' Meeting, essentially setting limits on any fees they consider excessive.
The IP draws their fee from the IVA fund. This is the name given to the money paid into the IVA by the applicant.
How Much Does An IVA Cost?
Over the last few years the creditors have taken issue with the level of IVA costs that can be drawn by IPs, stating they felt the IVA fees were too high. There has been much said in the press and on forums about how much an IVA costs, with little sympathy being shown to IP's for the position they find themselves in.
But after much consultation between the Insolvency Service, Insolvency Practitioners and creditors, a set of guidelines has been introduced as part of the IVA Protocol.
The IVA protocol has been designed to streamline the IVA application process, whilst simplifying much of the IP's workload. This, in turn, has ensured that an IVA's costs are now reduced greatly.
There are 2 main categories that describe the IVA's costs and they are:
- Nominee Fee: To cover the work done before the IVA Creditors' Meeting. This fee will vary on a case by case basis, but typically will be in the region of £1,000 to £1,500. This is called the Nominee Fee.
- Supervisor Fee: A monthly administration fee will also be charged to administer the IVA throughout the 60 months. The IP will agree this IVA fee with the creditors and it will vary case by case, but would normally be between £400 to £800 per year. Yet again paid for from the IVA fund. This is called the Supervisor Fee.
IMPORTANT: If you try to enter into an IVA with IVA.info and we are unsuccessful, there will be no IVA costs for you to worry about because IVA.info operates a No IVA : No Fee policy.
Who pays the IVA costs?
They are deducted from the IVA fund. It is therefore reasonable to say that the costs are paid for using the IVA applicant's money.
However, when looked at more closely, it can be argued specifically in the event of a successfully completed IVA, the actual IVA costs are paid for by the creditors.
The IVA applicant is only required to pay into the IVA what is deemed affordable and for fixed period, normally 5 years. Whatever is paid into the IVA fund during this period will settle the debt. If there is any debt left unpaid it is written-off.
It is unlikely the applicant will have contributed enough money into his IVA fund to be able to repay his debts in full and having the IVA fund reduced by the IVA costs makes it all the less likely. By allowing the IP to draw his costs from the IVA fund, creditors accept it will ultimately reduce the amount of money they recover from the IVA, a point they accept and agree to at the Creditors' Meeting.
So, in the case of a successfully completed IVA the creditors agree to pay all the IVA costs.
However, when an IVA hits problems and fails to complete successfully things change. It is the applicant who is left to cover the IVA costs, for the IVA costs are deducted from the IVA fund in the same way, but there is no debt write-off to speak of. As a result, the applicant remains liable for the original debt levels, which are only reduced by what's paid over from the IVA fund after the IVA costs have been draw by the IP.
So, when an IVA fails to complete successfully, it is the applicant who pays all the IVA costs.