The issue of IVA fees is a real concern for most. After all, if you’re already in debt the prospect of incurring even more can be quite a daunting prospect.
Firstly, make no mistake that an IVA can’t be entered into without the assistance of a licensed IVA practitioner. Under the Insolvency Act 1986 only a properly qualified person can administer an IVA so you won’t be able to do it yourself. So, regardless, you’ll certainly need to think about IVA management fees and how best to approach paying them.
IVA management fees generally take one of three options:
1. By being incorporated into your IVA arrangement when you write off debt. So, when you pay your monthly fee to your insolvency practitioner, their own fees will be deducted before the remaining amount is distributed to your creditors as agreed.
2. By being paid upfront. Whilst this may well get the issue of management costs out of the way from the onset there are also certain disadvantages to this option – not least of all the prospect of being left out of pocket if your IVA isn’t accepted by at least 75% of your creditors. If this happens then you’ll have to consider other debt management options (such as bankruptcy) but you’ll still be liable for your advisor’s fees – and these can quite easily be anything up to £5,000.00.
It’s also worth noting that some IVA practitioners will charge you as much as your first two monthly payments as an introduction fee for their involvement in the initial stages of the application process. This type of fee is usually referred to as either a ‘set-up fee’ or an ‘introducer’s’ fee – either way, they can certainly be quite expensive and are generally best avoided.
3. By operating on a ‘no IVA, no fee’ basis. This means that if your chosen advisor isn’t able to set up an IVA on your behalf (for example, if your creditors don’t accept your proposal) then you won’t owe them any fees for the work undertaken up until that point.
In terms of the fees payable, these are generally split into two separate components namely:
1. A Nominee’s fee. This covers your advisor’s work for the initial stages of the IVA preparation, including the work undertaken in drafting the IVA proposal for onward submission to your creditors. It should also include setting up the Creditor’s Meeting where your proposal will then be considered.
2. A Supervisor’s fee. If your proposal is accepted then the supervisor fee covers the ongoing supervision of your IVA for the full duration of it (usually 5 years). Your chosen practitioner will also be responsible for conducting an annual review of your IVA to ensure that your circumstances haven’t changed and that the IVA doesn’t need to be modified in any way.
In some cases the insolvency practitioner fees will be paid by your creditors but this can vary so it’s important to ensure that you’re absolutely clear on what is paid and by who before you enter into an IVA. Once you’ve signed on the dotted line, the IVA becomes legally binding on all parties and can very rarely be modified.