Where your IVA payments actually go

Two fees, both taken from your contributions

There are two main charges in almost every Individual Voluntary Arrangement, and neither of them is an extra bill. Both come out of the money you pay in each month, which is why an IVA can feel as though it is making slow progress in the early stages.

• The nominee’s fee covers the work of putting the proposal together, advising you on it, and taking it to your creditors for a decision. It is a one-off cost, agreed by creditors when they approve the arrangement, and it is usually recovered from your first several monthly payments.
• The supervisor’s fee covers running the arrangement for its whole term — collecting your contributions, reviewing your income and expenditure each year, dealing with creditors, and closing the case at the end. It is drawn periodically across the life of the IVA.

On top of those sit disbursements: genuine third-party costs such as insurance-backed bonding, property valuations, and Land Registry or credit reference charges. They should be itemised, not rolled into a vague total.

Who decides what the fees are

You do not negotiate the fees directly with the practitioner. They are set out in the proposal, and your creditors vote on that proposal. Large creditors — banks, credit card issuers and the debt purchasers who now hold much of this debt — frequently modify the fee basis before they will approve an arrangement, which is one reason the final approved terms sometimes differ from what you were originally shown.

Because creditors are effectively paying the fees out of money that would otherwise reach them, they have a real incentive to keep them in check. That is a genuine protection, and it is worth knowing about, but it is not the same as the fees being small.

How to see your own numbers

You are entitled to see where your money has gone, and asking is not being difficult.

1. Ask for your annual report. The supervisor must report to you and to creditors each year on the progress of the arrangement, including receipts and payments. If you have not been receiving these, ask for the ones you have missed.
2. Ask for a statement of account. Request a breakdown showing total contributions received, total fees and disbursements drawn, and total distributed to creditors, from the start of the arrangement to date.
3. Check it against your bank statements. The contributions figure should match what has actually left your account. Discrepancies happen, usually through missed or duplicated payments, and they are much easier to sort out early.
4. Ask what happens to any windfall. Most arrangements contain terms about bonuses, inheritances, PPI-style refunds and equity in a property. Know in advance what would have to be handed over, and what would not.

Questions worth asking

If something looks wrong, these four questions get to the bottom of it faster than a general complaint.

• How much of my total contributions to date has reached my creditors, as a figure and as a percentage?
• Have all the fees drawn been on the basis approved by creditors, and has that basis ever been varied?
• What disbursements have been charged, and to whom were they paid?
• On current projections, will the arrangement complete on its original term, and if not, why not?

A regulated firm should answer all four in writing. Reluctance to do so is itself informative.

If the answers do not satisfy you

Fees are one of the most common subjects of complaint about insolvency practitioners, and there is a proper route for it that costs nothing — set out in the guide on how to complain about an insolvency practitioner. Before you get there, put your questions in writing to the firm and give it a chance to answer, because the complaints process will expect you to have done that.

An IVA is a formal insolvency procedure and it is not right for everyone. It affects your credit file for at least six years, it can put equity in a jointly owned home at risk, and failing one leaves you worse off than when you started. Take free, impartial advice before entering into any debt solution.

More guides on this site

• How to check whether your IVA is still active
• What happens to your IVA when the firm that set it up closes
• How to complain about an insolvency practitioner

See all guides