How much will I have to pay into my IVA?
An IVA is essentially a legally negotiated compromise between you and the people you owe money to. In return for paying back what you can realistically afford each month (as well as releasing any available equity at the end of the IVA term – only if you can afford to), your creditors will agree to freeze interest and write off the balance of any unpaid debts.
You will not be asked to make any additional payments to cover fees.
The IVA fees are part of the reduced monthly payments you make to your creditors. Your creditors are effectively agreeing to receive a lower amount back so that your IP can be paid for their work. Even if your IP decided to charge nothing at all, it wouldn’t benefit you as the difference would go to your creditors.
Whilst most people entering an IVA will never be affected by IVA fees, there are some exceptional circumstances where you may be required to cover the cost of the fees. If you benefit from a windfall during the term of your IVA, which enables you to repay your debts in full or if your IVA fails then it is unlikely that you will be able to recover any fees you have paid up to that point.
There is a more detailed explanation of how fees work here.
The amount you can afford to pay back to your creditors each month is calculated by subtracting essential living costs (such as food, clothes and travel costs) and priority debt arrears payments (such as Council Tax arrears, mortgage arrears and rent arrears) from your income.
The purpose of the calculation is to show your creditors how much you have available to offer them at the end of every month after all your living costs have been taken into account. No matter how much your contracted monthly payments are, you’ll only ever be asked to pay what this calculation shows you can afford.
Be wary off companies altering your monthly expenditure in order to get your IVA proposal passed. You’ll have to stick to the agreed budget for the next five years so you need to be realistic about how much you can live on each month.
You can read more about IVAs and whether they are suitable for your situation in our IVA section.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.