How much does an IVA cost?

An Individual Voluntary Arrangement (IVA), is a formal, legally binding arrangement which allows sole traders and individuals to repay their debts in affordable monthly instalments. The cost of an IVA is based on several factors such as income and outgoings. Before an insolvency practitioner, constructs an IVA proposal for your creditors, they’ll assess your viability and affordability for the arrangement. Creditors can accept the proposed arrangement if they’re happy with it or reject it if they’re not.

If the arrangement is actioned, your IVA payments are monthly and are broken down into three fees: Nominees fee, Supervisors fee and expenses. These monthly payments are tailored to how much you can afford, and include the fee.

More information on Individual Voluntary Arrangements

Monthly payments

Once an IVA takes effect, you will start repaying your debts in monthly instalments tailored to what you can afford. The arrangement usually lasts five years, and after which, any unsecured debt still unpaid is written off.

Once the IVA is agreed and actioned, your IP will communicate with your creditors, saving you the stress of dealing with phone calls and visits from them.

However, you must maintain the payments; otherwise, the IVA could fail.

What are the fees in an IVA?

An IVA has no fixed costs, and how much you’ll pay is decided on a case-by-case basis. IVA fees are typically divided into three categories: Nominee fees, Supervisor fees, and expenses. Each covers different types of fees, associated with the cost of the IVA application, its implementation, and maintenance.

Nominee fee

The Nominee fee covers the gathering of data for the IVA proposal, the court application, preparation of documents, and the organisation of the creditors’ meetings. Creditors must approve the IVA before the Nominee fee becomes payable and the arrangement comes into force.

Supervisor fee

If your IVA proposal is accepted, the Nominee (the assigned insolvency practitioner in this case) becomes the Supervisor. From here, a Supervisor fee is taken every month before anything goes to your creditors. The Supervisor will monitor your progress for the arrangement’s duration and whether you’re keeping up with the payments, or even if you can increase contributions.

Like the Nominee fee, the Supervisor fee is calculated case-by-case. Again, this fee must be approved by the creditors and is often deducted from the arrangement’s monthly payments. This fee is variable depending on your arrangement.

Expenses

Finally, there are various expenses that must be incurred in the administration of an IVA, including the registration fee to the Insolvency Service, insurance over your payments and postage costs on the case. The payment of these costs does not require approval from creditors. There may also be costs incurred in obtaining legal advice or valuations of assets such as land or property.

What do I need to qualify for an IVA?

Before you can apply for an IVA, you must meet a few base criteria:

• A sizeable amount of unsecured debt that warrants an IVA (they’re most effective for debts exceeding £10,000).
• You must be able to provide a higher return to creditors through an IVA than if you were to go bankrupt.
• Reside in England or Wales.
• Your insolvency should relate to personal debt or debt amassed via a sole trader business.

For a better chance at approval, you should have spare funds available for the monthly repayments. You stand a better chance at being approved if you have a regular income, proving that you’re capable of sticking to the repayments.

How am I assessed for an IVA?

Your IP may provide you with a list of information you need to pass on to them before the meeting. These documents will help give the IP a better idea of your eligibility:

• Your creditors’ details and a breakdown of how much you owe, with supporting evidence.
• Proof of your income and savings.
• Mortgage or rent details.
• Details of your incoming and outgoing funds.
• Details of any assets (cars, property, land etc.)

The more information you can provide, the clearer a picture the IP will have, and the better they’ll be able to assess your situation and suitability.

If you’re deemed suitable for an IVA, the IP will put together a proposal, which they will present to your creditors.

What can happen if an IVA is refused?

In summary

An Individual Voluntary Arrangement (IVA) allows an individual or sole trader to repay their unsecured debts in monthly instalments. The arrangement must be carried out by a licensed insolvency practitioner (IP). The cost will instead come from the monthly payments to your creditors. These fees include the Nominee fee, covering work done prior to the arrangement’s approval, the Supervisor fee, which covers work done for the arrangement’s duration, and expenses, which cover expenses to third parties. To increase the chances of creditors accepting your IVA proposal, you should have an amount of debt which warrants the arrangement, regular income, and proof that you could provide a higher return than if you were to go bankrupt.

How we can help

If you’re struggling with personal debt, or debts amassed through a sole trader business, and feel an IVA could help set you free of those debts, speak to us today. Our initial advisors can offer you free, impartial advice with no obligation. Even if you’re unsure whether you would qualify for an IVA, we can help you decide the best path for you or your business, and help you clear your debts.

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