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 out of 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.
Can I enter an IVA for free?
Contrary to what many people think however, the CCCS and CAB do not offer IVAs for free. The law requires that a licensed insolvency practitioner must be engaged in the role of nominee in helping to prepare IVA proposals for a debtor and presenting such proposals to creditors. If creditors approve the IVA, then the licensed insolvency practitioner assumes the role of supervisor during the agreed term of the IVA, which is often for five years. In practice the nominee of an IVA will frequently continue to act as supervisor. There are no licensed insolvency practitioners who work for free. The CCCS and CAB offer excellent advice and they may refer a case onto an IVA provider.
A reputable IVA provider will fully examine the 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.
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.
To explore this option further please contact us at National Debt Relief.