PHILIP A BECK MA ACA MABRP
Chartered Accountant
Licensed Insolvency Practitioner
41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0870 4580620
email: pbeck@ntlworld.com
IVA - What does all this cost and how do you get paid ?
The costs of setting up and running an IVA may seem high, but there is a lot of work involved in advising the client, preparing the IVA proposal, gathering all the information required, preparing and filing the Nominee's report, sending the proposal to the creditors and holding a creditors' meeting. This process needs to be supervised by a highly qualified professional, who will either be an Accountant or a Solicitor, specially licensed to undertake insolvency work.
It won't cost you anything on top of the monthly payments you're already proposing to go into the IVA, as the costs and fees are paid from what will be going in to the arrangement, thus effectively the creditors themselves are actually paying for the IVA. Creditors realise that insolvency practitioners need to be paid for their work, therefore they do not object to proposals that show the IP's reasonable fees coming out of the money going into the arrangement.
There are however two circumstances where the costs of an IVA are crucial. Firstly, if it appears that you could repay your debts in full in 5-6 years or less without an IVA, then creditors will expect you to do that because they don't want the costs of an IVA to erode their dividend. IVAs are not meant for people who can pay in full without them. Secondly, you need to ensure that your IVA proposal will result in the creditors receiving at least 25% of their money back after costs, otherwise they won't vote for it. This 25% "hurdle rate" has come to be an industry standard below which it will be almost impossible to get your IVA proposal accepted. Recently, one major bank has imposed a hurdle rate of 40 pence in the pound after costs simply to reduce the volume of IVA proposals it is receiving.
Typically once enough monthly payments have been made after the arrangement has been approved, a fee of £2,000 + VAT will be drawn for the initial work in preparing and circulating the proposal and holding the creditors' meeting. Then once per year an annual supervision charge of typically £800 + VAT. The annual charge covers the cost of monitoring the monthly payments, general correspondence, and sending a report and dividend to the creditors once per year. Where two partners propose two IVAs in respect of joint debts the cost between them would be around 50% more than for a single IVA.
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IVA Questions and answers.
I have serious debt problems. What are the options ?
How do I know whether an Individual Voluntary Arrangement (IVA) is the best answer to my problems ?
How do I work out how much I can afford to pay per month ?
OK I'm considering an IVA . How does it work ?
Do I have to attend meetings, or can this all be done by correspondence ?
What do creditors expect from it and how likely is it they'll accept it ?
What happens if they don't like the deal ?
If the IVA is rejected, do I owe you anything ?
Will it really write off all of my debts ?
Will I live in poverty for the duration of the IVA ?
What if I win the lottery or get a big pay rise ?
Is an IVA more expensive than just going bankrupt ?
What will happen to my house, furniture, car and domestic effects ?
I run a business. What will happen to my business ?
I'm a professionally qualified person. Will I lose my livelihood ?
My partner has no debts, and I'm living with him/her. Will he/she have to contribute to the IVA ?
My partner and I have joint debts. Can we lump them all together in the same IVA ?
How do you get paid ? What does this all cost ?
What happens if I'm unable to keep up with the payments ?
What happens at the end of the arrangement ?
What other web sites do you suggest I look at for bankruptcy/IVA advice ?
Please note that this site deals only with personal insolvency law in England, Wales and Northern
Ireland. By law, only a Licensed Insolvency Practitioner can undertake an IVA for
you. If you need an Insolvency Practitioner in Scotland, visit The Institute of
Chartered Accountants of Scotland.
Copyright © Philip Beck Insolvency Practitioner, Cambridge UK, 2005. Bankruptcy and individual voluntary arrangements explained. Free IVA Advice. How to avoid bankruptcy with an Individual Voluntary Arrangement. Debt, debt advice, debt management, debt consolidation. IVA Resources • Portions designed by Affordable Web Site Design by RLT Design