Summary: This article clarifies the costs involved in an IVA and how they are paid.
With more people looking to Individual Voluntary Arrangements (IVAs) as a solution to increasing debt burden, there has been an increase in debt management companies that offer advice and to administer the IVA. There are a number of free services available, but the majority of companies will expect a fee for the service.
How much does a debt management company charge?
More often than not, a debt management company will offer a free initial consultation in order to establish what the best course of action is. Should the individual proceed with the company to administer the IVA, there will usually be a set up cost and an ongoing 'management fee', however these are built into the monthly repayment the individual pays, and as any outstanding debt is cleared once the IVA is completed, it could be argued that the creditors themselves are paying the fees. As a result, it is in the interests of the debt management company not to add too high fees in case the IVA is declined by the creditors on that basis (they want as much money back as possible).
What is the cost likely to be for an IVA?
As companies could charge different amounts, it is difficult to put exact figures on the costs, but the set up cost could be in the region of £1500, with ongoing 'management' fees being between £400 and £800 per year. It is important to remember that the fees are usually incorporated into the monthly repayment figure, so will not necessarily impact the individual directly.
What happens if my IVA is declined?
With competition in the debt management company market being high, many companies are now offering 'no IVA - no fee' policies, meaning if the IVA is declined, there will not be a fee. However, it is important to look around at the companies available to establish which is most suitable. There is no obligation to continue with a company after the initial consultation, so it is important that anyone considering an IVA asks how the fees are calculated and what costs could be involved.