Can I apply for an IVA on a conditional fee basis?

If you’re struggling with debt then it’s natural you’ll also be conce ed about incurring any further debt – and that’s perfectly understandable.

Unfortunately, whilst an IVA can certainly provide the ideal solution to managing debt and ultimately becoming debt free, they’re certainly not cheap to administer and you might be surprised to learn that you can expect to pay around £5,000.00 to your chosen insolvency practitioner to manage the arrangement on your behalf.

In the vast majority of cases, your insolvency practitioner will be able to incorporate their own charges into the IVA arrangement itself. This means that, if your proposal is accepted by at least 75% of your creditors, then you’ll be able to pay the arrangement cost through your one monthly repayment. For most debtors, this provides the ideal solution since it spreads the cost over a set period of time (usually five years) and therefore makes it much more affordable.

That said, other practitioners will ask for their management fee up front and this can certainly prove difficult for most. Another downside to this type of arrangement is that, in the event the IVA isn’t accepted by your creditors, then you may well find yourself having to pay the practitioner’s fee, albeit with no ultimate benefit or arrangement in place. For this reason it’s advisable to shop around before making any decision on who best to use for your IVA.

In the meantime, increasingly more practitioners are now offering the opportunity to apply for an IVA on a ‘no IVA, no fee’ basis. This means that if your IVA is declined by your creditors then they won’t charge any fees for the work they’ve undertaken up to and including that point. Ultimately, this also means that your chosen provider is more likely to have faith in your application since any rejection will mean they don’t get paid.

In some cases the practitioner’s fees will be paid for by your creditors and these will be detailed within the initial IVA proposal. Remember, most creditors will want to recoup at least some of the monies owed to them and will therefore co-operate as much as they can to ensure they don’t have to pursue costly enforcement action and/or apply to make you bankrupt (which can also be a very costly process in its own right).

In order to ensure that you’re getting the very best deal from your IVA it’s imperative to ask as many questions as you need to that you’re completely clear about the cost of entering into an IVA – and what will happen if your IVA fails. The more information you can provide to your advisor, the better, since he or she will then be able to assess your financial situation and put forward a solid proposal which is more likely to be accepted.

Regardless of whether the practitioner’s costs are included in the IVA or not, remember that the arrangement will only last for a period of 5 years and that thereafter, you can look forward to a debt free and more secure financial future.