An IVA isn’t free. Although you can roll up all costs in your monthly payments, it’s important to know what you’re paying for – and to look out for unnecessary charges.
Do you have to pay for an IVA?
Yes. By law you can’t set up an IVA on your own. You have to do it via a professional known as an insolvency practitioner (IP) and you’ll need to pay them for their services.
There’s no set fee for an IVA but costs tend to average about £5,000. There are additional fees if your IVA fails and the IP has to launch bankruptcy proceedings. Some providers also charge various set-up fees. We explore these below.
Do I have to pay the IVA fee up front?
Absolutely not. Given that the very reason IVAs exist is to support people who are struggling to manage debt, it would be unreasonable to expect you to suddenly find an additional £5,000. You’ll pay the fee back in instalments which will be included in your monthly payment figure.
That said, you may come across IVA providers who do charge certain upfront setup fees, booking fees or similar. They may even tell you that such fees are standard practice. They are not and you should avoid any IPs charging them.
What do IVA fees cover?
There are three parts to an IVA fee:
- The advice your IP offers before you set up the IVA
- The process of setting up your IVA, which will involve the IP making an application to the court and negotiating with your creditors (the people to whom you owe money) and getting a sufficient majority of them to agree to it
- Supervising the ongoing IVA to ensure you keep making your monthly payments and the creditors keep receiving their share. The IP will also be your first point of contact should your circumstances change
Your IPA will also need to pay a registration fee to register the IVA with the Insolvency Service. They’ll need to hold insurance to protect the money you pay towards your IVA and, if there are additional legal costs, your IP will need to pay those too. These costs are known as disbursements and your fee will also go towards these.
Does it matter what I pay for my IVA?
In one sense, the practical effect of a lower cost IVA over a more expensive one is limited. Your insolvency practitioner sets a monthly payment you can afford but that figure doesn’t alter depending on the IP’s fee. Whether your IVA costs are £6,000 or £4,000 the payments will be the same. All that will change is the way the money you pay each month is split between your creditors and your IVA, and your IP will handle this for you.
If your IVA fails, however, your costs will not be refunded. So whilst shopping around for a lower cost IVA provider may make little practical difference in most cases, it could reduce your liability if the IVA were to fail.
How long does it take to set up an IVA?
Usually between 4-8 weeks, with complex financial arrangements taking the longest time to set up.
Can I set up an IVA in Scotland?
IVAs are a common debt management tool in England, Wales and Northern Ireland, but Scotland operates a different system. Here, protected trust deeds (aka Scottish trust deeds) operate in a similar way, although there are some key differences.
Crucially, Scottish trust deeds tend to cost less than IVAs although, like IVAs, they do vary. Trust deeds should also have no upfront setup costs, although you may find some providers charging a wide range of additional and unnecessary fees. Find out more about the trust deed setup fees you shouldn’t pay here.
How do I set up a Scottish trust deed?
- Is An IVA Worth It?
- What If I Can’t Pay My IVA?
- Can I Get An IVA If I’m Self Employed?
- Rebuilding My Credit Rating After An IVA
- IVAs: What Will I Need To Show My Insolvency Practitioner?
- Who’s Most Likely to Need an IVA?
- How Much Does An IVA Cost?
- Can I Afford An IVA?
- IVAs – Can I Lose My Home?
- IVA And Trust Deeds | Whats The Difference?
- Apply For An IVA
- How Will My IVA Affect My Parents?
- An IVA Mythbuster
- Can An IVA Be Rejected?
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here