How Much Does an IVA Cost? Fees Explained

Who gets paid in an IVA?

Every IVAIndividual Voluntary Arrangement (IVA)An IVA is a legally binding agreement to repay a portion of your debts over a fixed period. Understand how IVAs work, eligibility, costs and consequences.Read more → must be set up by a licensed insolvency practitioner (IP). GOV.UK says there are usually two kinds of fee: a set-up fee for preparing the proposal and getting creditorsHow to Deal with Creditors: Communication and NegotiationPractical advice on communicating with creditors, negotiating affordable repayments, and understanding your rights when dealing with the companies you owe.Read more → to vote on it, and a handling fee taken from each payment you make. Some arrangements also include separate charges for things like annual reviews or dealing with the creditors' meeting, so it is important to ask for every charge in writing.

The money you pay each month is shared out in a set order. Fees and expenses of the arrangement are normally paid first, and what is left goes to your creditors. This is the key point that surprises many people: if you pay £200 a month and fees take a large slice of the early payments, your creditors may receive much less than you expected for the first year or more.

Typical fee structure

There is no single government-set price for an IVA, and fees vary between practitioners. What matters is how they are structured and whether the total is clear before you commit. The usual pattern looks like this:

Some practitioners charge a fixed amount, while others take a percentage of what you pay in. Neither is automatically better. A fixed fee is easier to predict. A percentage can look small each month but add up over several years. What you want is the total cost over the whole arrangement.

How to work out the real cost

Before you agree to an IVA, ask the practitioner for a written breakdown covering the following points.

• The total amount you will pay in over the full term
• The total fees and expenses across that whole term
• The amount expected to go to your creditors, and what share of each debt that is
• What happens to fees if the IVA fails or ends early
• Whether the fee structure changes if your payments go up or down at annual reviews

Fees and your credit file

The IVA fee is separate from the effect on your credit record. An IVA is recorded on your credit fileHow Credit Scores Work in the UKHow UK credit scores work: what the credit reference agencies record, what affects your score, why scores differ between agencies and what lenders actually see.Read more → for six years from when it starts, and it is also listed on the public Individual Insolvency Register while it runs. GOV.UK says it is removed from that register three months after the IVA ends. See our guide to IVAs and your credit score for more on what that means for borrowing.

Questions to ask before you sign

A reputable practitioner will answer every question below without pressure. If you get vague replies, or are told you must decide today, treat that as a warning sign.

• Is the practitioner licensed, and by which professional body?
• What is the exact fee for set-up and for ongoing handling?
• Is any part of the fee paid to a referral company or lead generator?
• How much of my first twelve payments goes to creditors?
• Can I see the full proposal and my creditors' likely return before I decide?
• What are my options if I cannot keep up the payments?

Why free advice comes first

Because an IVA costs money and has long-lasting effects, it is worth getting free, impartial advice before you speak to a company that sells IVAs. Free advisers at StepChangeStepChange Explained: What It Does and How It WorksWhat the debt charity StepChange offers, how its free debt advice and debt management plans work, who it suits and what to expect when you contact them.Read more →, National DebtlineNational Debtline: How It Works, When to CallWhat National Debtline is, who runs it, what it can help with, how to get free advice by phone, webchat or online tools, and what to expect.Read more → and Citizens Advice can compare an IVA with a debt management plan, a Debt Relief OrderDebt Relief Order (DRO)A Debt Relief Order is a formal solution for people with low income, low debt and few assets. Learn how DROs work, eligibility criteria and what happens to your debts.Read more → and bankruptcy for your circumstances, and they do not earn commission if you choose one option over another. Our overview of free debt advice in the UK explains where to start.

An IVA can be the right answer, particularly if you have a steady income, a large unsecured debt and want a legally binding end date. But the cost is real, so the decision should be made with all the figures in front of you. Our main guide to the Individual Voluntary Arrangement covers how the whole process works.