What Is The Cost Of An Individual Voluntary Arrangement

If you are insolvent and are considering entering into an IVA you may be worried about whether or not you can afford the fees involved with the process. This is understandable but it should not really be a concern. If the insolvency firm you are using for your IVA is any good at all then they should put this concern to bed quickly and assuredly.

It is actually the creditors who pay the fees in the first instance since the money which the debtor pays to the IVA agreement is repayment of the debt that they owe. For now we will call these contributions ‘the IVA fund’. The fees of the IVA are paid from this IVA fund which the debtor pays into. In relation to the payment of fees, let us look at the role of the IP or Insolvency Practitioner.

The Insolvency Practitioner (IP) is known as the Nominee up to the point when the IVA is approved or rejected at the Meeting of Creditors. After this IP is known as the Supervisor. These simply put are the terms used in the legislation and reflect the fact that the role of the Insolvency Practitioner changes between the time when the IVA proposals are offered to creditors and the time when they are accepted. On that note the Nominee IP does not have to be same person as the Supervisor IP although they are in most cases the same person.

The Supervisor Insolvency Practitioner receives monthly payments from the debtor during the course of the IVA and they are responsible for controlling the IVA fund. They have to manage the fund and make payments out of it. These payments are broken down into 3 sections: dividends to creditors; fees payable to the IP (Nominee & Supervisor) and disbursements such as the cost of registration of the Individual Voluntary Arrangement, insurance and VAT on transactions.

IVA fees
What usually happens is that the IVA proposal carries the details of the fees and costs.

The Insolvency Practitioner fees will have been set and agreed when the Meeting of Creditors approved the IVA. At least 75% of the voting creditors (as measured by the amount of the debts) have to agree to these fees. What usually happens is that the IVA proposal carries the details of the fees and costs. The creditors can amend these, by way of modifications to the IVA, if they think they are too high.

The IP cannot charge more than the amounts that have been agreed without the permission of the creditors (again at least 75% of creditors, as measured by the amount of the debts, have to agree) even if work of supervising the Individual Voluntary Arrangement turns out to be more extensive and costly than originally anticipated. Creditors are not slow to reduce proposed fees if they think they are excessive since the lower the fees the higher the amount of debt that will be repaid to them from the IVA Fund.

The insolvent debtor should not be concerned about his or her capacity to pay the IVA fees – they come from ‘the IVA fund’ and are not an additional burden to be borne by the debtor.