{"id":590,"date":"2013-12-13T12:51:42","date_gmt":"2013-12-13T12:51:42","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=590"},"modified":"2019-01-28T14:11:51","modified_gmt":"2019-01-28T14:11:51","slug":"breakdown-of-iva-payments","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/breakdown-of-iva-payments\/","title":{"rendered":"Breakdown of IVA Payments"},"content":{"rendered":"\n

Firms which offer insolvency services such as Individual Voluntary Arrangement<\/a>s (IVAs) or other financial solutions do so because it is a business and because they have an expectation of making a profit from the business. <\/p>\n\n\n\n\n\n\n\n

If they do not make a profit, then ultimately they go out of business. In the last two years in particular, a number of IVA providers have ceased to trade for this very reason.<\/p>\n\n\n\n

For some of the insolvency firms who ceased to trade, the underlying \ncause was that about two years ago creditors decided to sharply reduce \nthe fees they were willing to pay providers of insolvency services. The \nmechanism used by creditors to do this was to appoint and authorize \nagents to act on their behalf and deal with IVA proposals put forward by\n debtors and the insolvency firms who represented them. These agents of \ncourse cost money but creditors felt that they would be self financing \nin that any money saved from reductions in fees would be more than \nenough to cover the cost of the agents\u2019 services. In addition creditors \nfelt that there were efficiencies to be gained from the economy of scale\n which using such agents would afford.<\/p>\n\n\n\n

The agents would build up expertise in due course and would represent a wide range of creditors. They could standardize the approach to IVA proposals in the interests of the creditors whom they represented. Rather than a diverse bunch of creditors each seeking to apply their own often conflicting modifications to a debtor\u2019s proposal, they could engage the services of one or two agents. These agents would be able to standardize modifications to debtors\u2019 IVA proposals and have the voting strength to get them approved. Most modifications have the goal of increasing the dividends to creditors by either increasing the contributions by debtors or reducing the administrations costs of the IP (fees and disbursements) or a combination of both. Using agents in this way created what was in effect a cartel where the interests of the creditors were merged and maximized and the interests of the debtor represented by their IP were suppressed.<\/p>\n\n\n\n

\"Reviewing<\/figure><\/div>\n\n\n\n

By driving down fees in this way creditors have made it almost uneconomic for firms to provide insolvency services and in particular IVA services to debtors. The dividends for creditors were thus maximized. Clearly, creditors feel that it is they who pay the administration costs of the IVA. The debtor makes his or her monthly contributions to the IVA over the usual five years term. These monies are used to pay the administration costs (IP fees and disbursements) of the IVA including VAT and to pay dividends to creditors, with a portion of the debts being written off.<\/p>\n\n\n\n

Although the administration costs are paid out of the contributions made to the IVA by the debtor, it really is correct to say that it is the creditor who pays. After all it was the creditor who lent the money in the first place and it is the creditor who is going to have to make do with only a portion of the debt being repaid. Debtors should not really have any concerns about who pays the costs.<\/p>\n\n\n\n

The creditor pays and the debtor gets a really good deal, particularly when a substantial portion of the debt is written off.<\/p>\n\n\n\n

The debtor also gains or at least does not lose even when the \nproposal for an IVA is rejected by creditors. In this case it is clearly\n the IP and his or her insolvency firm which loses mainly because most \nreputable insolvency firms who provide advice do not charge any upfront \nfees. The IP or the insolvency firm incurs all the costs of researching \nand compiling the IVA proposal and in most cases it is on a \u2018no foal, no\n fee\u2019 basis. If the IVA proposal is rejected, the debtor has nothing to \npay. The services already provided by the IP\u2019s firm would usually \ninclude examining the debtor\u2019s circumstances fully, investigating all \noptions for a financial solution including IVA, bankruptcy, debt \nmanagement or possibly debt consolidation and advising the debtor \naccordingly.<\/p>\n\n\n\n

If the debtor decides to proceed with an IVA the nominee usually \ncarries out all the preparatory work for no charge. If the IVA proposal \nis rejected at the meeting of creditors, then the debtor has nothing to \npay and the reputable insolvency firm receives no fees.<\/p>\n\n\n\n

However, not all insolvency firms behave in this way. It is important\n for the debtor to clarify precisely what will be free and what will \nnot. Best time to do this is at the very beginning. If not satisfied \nwith the IP or insolvency firm or if the explanations are unclear the \ndebtor should simply walk away. Go to another provider \u2013 and another \u2013 \nuntil you are satisfied. With the competition in the marketplace, there \nare plenty of firms eager to meet your needs in a professional way. \nInternet search engines also provide a route to satisfaction. Initial \nenquiries can be done by phone so when you contact a reputable firm, you\n are not going to be embarrassed by your lack of knowledge about \nfinancial matters.<\/p>\n","protected":false},"excerpt":{"rendered":"

Firms which offer insolvency services such as Individual Voluntary Arrangements (IVAs) or other financial solutions do so because it is a business and because they have an expectation of making a profit from the business.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-590","post","type-post","status-publish","format-standard","hentry","category-iva-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/590","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=590"}],"version-history":[{"count":3,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/590\/revisions"}],"predecessor-version":[{"id":643,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/590\/revisions\/643"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}