At Turn Debt Around we want to provide you with as much information as we can so that you are armed with the knowledge to make an informed decision about whether a debt solution is right for you.
To help you, we have pulled together some useful leaflets and websites for you to look at. We've also provided examples of the fees that you may pay.
You'll find the information you need by clicking on the links below:
Important leaflets
Useful websites
Fees
Fees - Individual Voluntary Arrangements
Fees - Protected Trust Deeds
Important leaflets
If you live in England or Wales, the leaflet 'In debt? Dealing with your creditors' from The Insolvency Service is a government produced publication which summarises each of the main ways of dealing with debt. It sets out how each option works and explains the pros and cons.
If you live in Scotland, the leaflet 'Debt Advice and Information Package' from The Accountant in Bankruptcy helps you to deal with your creditors and your debt.
Useful websites
Accountant in Bankruptcy
DirectGov
Institute of Chartered Accountants of Scotland
Institute of Chartered Accountants in England & Wales
Office of Fair Trading
Financial Ombudsman
Fees
We will discuss any fees with you before you make your decision about whether a debt solution is right for you. To give you an idea of the fees you may pay, we've given some examples below for both individual voluntary arrangements and protected trust deeds.
IVA Fees
An insolvency practitioner will charge fees for their role as the nominee and as the supervisor. A separate fee is payable for the insolvency practitioner's work in each of these roles. An insolvency practitioner will also charge you for various additional expenses, known as disbursements.
Nominee Fee
The nominee fee is a fixed fee and covers the insolvency practitioner's work in setting up the proposal to your creditors. Before an IVA is presented to creditors, the insolvency practitioner acts as your nominee and is required to review your IVA proposal and provide a report to advise whether in their opinion, it has a realistic chance of success. The nominee's fee covers this initial work, in addition to the following tasks:
- Drafting the IVA proposal on your behalf
- Gathering information regarding your creditor claims
- Giving notice of and holding a meeting of creditors
The insolvency practitioner will be paid the nominee fee out of the first payments you make into the IVA and these will not be paid to your creditors. This means your accounts will go into arrears (or further into arrears).
Supervisor's Fee
The supervisor's fee covers the ongoing maintenance and supervision of your IVA right up to the day it finishes (in most cases, this would be 5 years). This work typically includes:
- Completing annual reviews of your IVA
- Providing reports to creditors
- Distributing dividend payments to creditors
- Addressing any major issues that arise if your financial circumstances change, for example, as a result of a change of your employment, your insolvency practitioner may arrange an IVA variation (a legally binding change to the terms of your IVA, designed to help you bring your IVA to a successful close)
The calculation of the supervisor's costs and fees will depend on the proposal and is therefore subject to your individual circumstances.
It is up to you to fix the basis of the supervisory fees as this will form part of your proposal to creditors. Your creditors will be asked to vote on your proposal and at least 75% of creditors who vote at the meeting must vote to approve it, including the fee, before your proposal can be accepted. The level of the supervisor's fees will also affect the return to your creditors under the arrangement and will therefore affect their decision to accept your proposal.
Payment of fees
All IVA providers charge fees in line with an agreed scale set by creditors. Fees are normally taken as part of the single monthly payment you make towards your IVA.
Fees depend on the amount you owe and how much can be repaid during the IVA. Your IVA proposal will detail the exact amount of fees being charged by the insolvency practitioner.
The following example shows typical fees and payments in an IVA:
- Nominee fee - £1,250
- Supervisor fee (over 60 months) - £2,475
- Expenses - £290
- VAT - £750
- Typical monthly payment - £300
- Total paid by individual - £18,000
- Amount owing at the beginning of the IVA - £31,000
- Net paid to creditors - £13,235 (43%)
- Amount written off at the end of the IVA - £17,765 (57%)
* Example based on a typical client - with unsecured debts of around £31,000 who has no equity in any property and completes a 5 year IVA.
Warning - if your IVA fails
As a significant amount of your payments into an IVA are taken first to meet your insolvency practitioner's fees, if your IVA fails you will remain liable for the balance of your debt and any insolvency practitioner fees and costs already incurred.
Protected Trust Deed Fees
Your Trustee will charge a fee for setting up and administering your trust deed. This includes:
- Drafting and administrating the Trust Deed proposal
- Corresponding with your creditors
- Ensuring your monthly contributions are distributed to your creditors and any other assets are dealt with
- Periodic reporting to creditors and the Accountant in Bankruptcy
- Dealing with any other issues or concerns during the course of the Protected Trust Deed
It's important for you to know that you will not receive a bill at any stage. When you make your agreed monthly contributions, it creates a 'pot of cash' and your Trustee takes their fees from that pot before the money is distributed amongst your creditors.
The fee the trustee will charge will depend on your individual circumstances but typically for a new Trust Deed case, the fee would be around £6,000. This includes VAT and statutory costs that must be paid. This fee is based on the contributions you will make to your creditors and additional fees may be taken if the Protected Trust Deed period is likely to exceed three years or if your Trustee needs to deal with any equity or assets that you may have.
Warning - if your Protected Trust Deed fails
If your trust deed fails, you remain liable for your debts and your creditors will be able to pursue you for repayment.