An IVA does have a cost. However you do not have to pay this yourself. The fees payable are deducted from the payments you make.

Included in this article:

• Do you have to pay an Up Front Fee to start an IVA?
• How much does an IVA cost once Accepted?
• Is the cost of the Arrangement standard?
• Do you still have to pay if your IVA fails?

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Do you have to pay an Up Front Fee to start an IVA?

If you apply for an IVA you do not have to pay anything up front. The Provider you choose to implement the Arrangement should do all the initial work required to get it in place for free.

A request for an up front payment is rare. It should only happen if you have HMRC debt. If you are asked to hand over cash up front in any other circumstances think twice. Reputable IVA companies do not require such a payment.

If you owe money to HMRC they might demand that you lodge some cash with your Provider before your IVA is agreed. This is to ensure money is available to make you bankrupt if it is accepted but then you do not pay.

Once the Arrangement is in place your IVA company can charge fees. However these are taken from the payments you make. If your Proposal is not accepted there will be nothing to pay.

How much does an IVA cost once it is Accepted?

Once an IVA is accepted the Insolvency Practitioner (IP) responsible for managing it can charge fees. These are known as Nominee and Supervisor fees.

The Nominee fee covers the work that the IP has done to get the Arrangement in place. It is normally £1000-£1500. The Supervisor fees pay for its ongoing management. They are normally 15% of the amount paid back.

The amount that will be deducted from your payments for both Nominee and Supervisor fees is clearly highlighted on your proposal document. They are agreed up front with your creditors.

You do not have to pay the IVA Nominee and Supervisor fees yourself. They are deducted from the agreed payments you make into the Arrangement.

Is the cost of an IVA standard?

The Nominee and Supervisor fees charged by Insolvency Practitioners are standard. It does not matter which company you use. The fees will be the same.

This standardisation has been introduced by the major banking creditors. IPs know that if they deviate and try to charge more the IVA is likely to be rejected.

Standard fees mean you do not have to worry about your IVA being rejected on the basis of your Provider charging too much. In terms of costs it has just as much chance of being accepted with your IP as with a different one.

If you are a sole trader or owner director implementing and managing your IVA is more complex. As such your IP is allowed to charge Nominee and Supervisor fees that are higher than the standard levels.

Do you still have to pay if your IVA fails?

If you are unable to maintain the agreed payments there is a risk that your IVA could fail. If this happens you are not be liable to pay anything more towards Nominee or Supervisor fees.

However your IP can deduct their outstanding fees from any money that you already paid into the Arrangement.

As a result of this if your Arrangement fails within the first 12-18 months it is likely that all the money you paid in will be taken in fees. Your debts will not have gone down at all.

It is important not to start an IVA unless you are confident that you can sustain your agreed payments. If you do not and it fails any payments you have made may be lost.