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IVA fees misconception

Misconceptions of IVA fees

Authored by Lisa Hogg

Lisa Hogg

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Approximate read time: 3 minutes

Individual Voluntary Arrangements (IVA) can help individuals and sole traders struggling with debt, to repay what they owe. While the process can help those looking to pay back their unsecured debts, there are a lot of myths and misconceptions about IVAs, the process and fees that are associated with them. So, allow us to look at some of the more common misconceptions about IVA fees.

IVAs are free

IVAs do have fees, which go towards setting up and implementing the arrangement, and maintaining it afterwards. Your insolvency practitioner (IP) will discuss your fees with you before the arrangement is actioned and will vary depending on your requirements. At Wilson Field, we don’t charge an upfront fee for an IVA, and the fee instead comes out of your monthly repayments; deducted before being split between your creditors.

If you’re struggling to repay what you already owe, taking on another outgoing might seem counterproductive, which leads into our next misconception.

More information on an IVA’s costs

IVA fees will bankrupt me

While IVAs are not free, it’s extremely unlikely that the fees, or payments alone will force you into bankruptcy. Your IP will decide your monthly contributions and how much you’ll pay into the arrangement. These repayments are tailored to what you can afford monthly, and the IP monitors your progress for the arrangement’s duration, so the contributions can be changed if necessary. (Variations or alterations to the arrangement require your creditors’ approval).

IVAs are just more debt

If you’re already struggling with debts, surely the last thing you need is more money going out? In fact, an IVA is not an additional expense on top of paying off your debts. All payments to the included creditors are consolidated into a single monthly outgoing. The IP analyses your incomings and outgoings, and ensures these payments are affordable for the arrangement’s duration.

More on an IVA’s benefits and considerations

IVAs are a quick fix

Despite some companies claiming their IVAs can write off your debts overnight at no cost to you, the process often takes longer. IVAs tend to last five years from the commencement date, though this can vary depending on how much you can afford to repay.

More on applying for an IVA

An IVA can settle any amount of debt

Some providers will tell you that an IVA can settle any amount of debt. In reality, IVAs can only be used for unsecured debts and are best suited for amounts larger than £10,000 to two or more creditors. IVAs are often unsuitable for smaller debts, and other arrangements and repayment orders more suited to smaller amounts are available. Bankruptcy could also be an option, depending on your circumstances.

In summary

While they can be versatile and useful arrangements to help clear individual and sole trader debts, an IVA is not a miracle fix, and there are other misconceptions about them and their fees. They are not a miracle fix. There are fees associated with IVAs; which cover setting up the arrangement, its implementation and maintaining it thereafter. The IP tailors your payment amounts to what you can afford, and this can be altered with the creditors’ approval. It won’t fix your debts overnight; IVAs typically last five years and are most suitable for unsecured debts greater than £10,000 to two or more creditors.

If you’re struggling with personal debt, or debts amassed through a sole trader business, then an IVA could help you repay what you can afford. It can potentially provide creditors with a larger return than through bankruptcy and stops creditor pressure for the duration. Speak to one of our initial advisors today for free, impartial advice with no obligation.

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