People who want to find out about Individual Voluntary Arrangements (IVAs) or other financial solutions are sometimes wary about making enquiries and trying to obtain financial advice on the basis that there is no such thing as a free lunch.
They may feel a little intimidated that their own feelings of ignorance about financial matters will be revealed and that they may be made to feel stupid. This is quite understandable when you consider the whole plethora of new financial terms which might be quoted at them. Words like equity, dividends, insolvency, creditors and debtors – not to mention bankruptcy or trustee – may be simple for accountants and bankers but for many ordinary people they just enhance their fears. Is it any wonder that some people would prefer to not know and just bury their heads in the sand rather than address their financial problems?
It may come as a surprise to people who find themselves in financial difficulties that there are many reputable insolvency firms and individual insolvency practitioners out there who provide advice and who do not charge any upfront fees. However, not all service providers behave in this way. It is important to clarify precisely what will be free and what will not. Best time to do this is at the very beginning. If not satisfied or if the explanations are unclear you can walk away. Go to another provider – and another – until you are satisfied. Such enquiries can be done by phone so you are not going to be embarrassed by your lack of knowledge about financial matters.
A reputable IVA provider will fully examine a debtor’s circumstances and investigate all options for a financial solution including an IVA, bankruptcy, debt management or possibly debt consolidation and will advise the debtor accordingly. At this stage no fees should be charged. If the debtor decides to proceed with an IVA the nominee will carry out the preparatory work for no charge. If the IVA proposal is rejected at the meeting of creditors, then the debtor has nothing to pay and the reputable insolvency firm will receive no fees. If however the IVA is approved, the debtor begins to make the agreed contributions, often on a monthly basis. The supervisor lodges these funds into a bank account on behalf of the debtor and it is from this account that dividends are paid to the creditors and the insolvency practitioner can begin to recover fees for work done in relation to the IVA. These fees are clearly spelt out in the IVA proposal and already agreed by the creditors. This means that the only payment made into an IVA is the monthly payment and this covers everything. There is no such thing as a free iva.
In an IVA people repay their creditors as much as they can afford within a reasonable period of time, often within five years. They know that creditors frequently get little or nothing from bankruptcy. They know that that there is little or no social stigma attached to an IVA. Friends, neighbours and even family members do not need to know that they are in an IVA. In bankruptcy, anybody could know.
Reputable firms who provide IVA services do not charge any upfront fees. If they do, best to avoid them. You should pay nothing until after your IVA is approved and then all contributions made cover the repayments on your unsecured debts and the professional IVA fees and costs.
For more information on all sorts of financial solutions including IVAs, please contact us at National Debt Relief.