IVAs (Individual Voluntary Arrangements) offer an excellent way to repay debts by allowing people to make affordable monthly repayments over, typically, a five year period. During this time interest on the debt is frozen, creditors cannot contact the debtor and a certain amount of the debt is written off completely.
Perhaps unsurprisingly therefore, given the benefits, IVAs are becoming increasingly popular. This is shown by the fact that the number signed in 2006 was more than double the 2005 volume. Yet, despite the growing popularity of IVAs, there is still some confusion about how much they actually cost. In this article we will try and clarify this subject.
Firstly, on the issue of fees:
- Debtors should not pay insolvency practitioner fees on top of their monthly re-payment contributions
- Administration fees are essentially paid for by the creditors, taken out of the monthly payments that the debtor makes. In other words, the higher the fee, the less money your creditors get - but the amount you pay stays the same
Secondly, how much does an IVA cost you?:
- When your Insolvency Practitioner submits your IVA proposal to your creditors, you will have to specify the amount of money that you are able to re-pay every month. In other words, the re-payment amounts vary from one individual to another depending on what they can actually afford.
- An IVA advisor will help you to work this figure out by examining your income minus expenditure plus any assets (such as a home) that you could put towards your IVA.
- As a general rule if you cannot afford to pay at least £200 a month, chances are that your IVA will be rejected and another method might work better for you.
In our experience, creditors do not usually accept IVAs if they will get less than 20-30% of what they are owed. This, of course, means that a successful IVA could result in up to 80% of your debt being written off completely.
Clear Start’s National Debt Helpline , prides itself on offering an ethical and professional service that people can rely on. The feedback from happy clients and messages posted across the internet are testament to the service that the organisation provides.
You can speak to a specially trained advisor on any debt matters, and with no obligation, simply by calling their freephone number.
Call Clear Start on 0800 138 5445
Visit us at www.clearstart.org
E mail us at email@example.com
For further information about Individual Voluntary Arrangements, please visit IVA Advice Service