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The Process
Once you have decided that an Individual Voluntary Arrangement (IVA) is right for you, you will be asked questions about your financial position. Based on the information you have given, a repayment proposal will be agreed with you. Once an IVA proposal has been drawn up you will need to check this and with your consent we will then contact your creditors.
Your creditors will receive a copy of your proposal and a report from the Insolvency Practitioner recommending the proposal to them.
A meeting of your creditors will be arranged for the creditors to vote on the proposal – usually approximately 18 days after the proposal is sent to them. This meeting is normally held at our offices and it is unusual for anyone to attend in person. Votes are received by post or fax.
You do not need to attend the meeting but it is important for you to be available by telephone in order for any points which are raised to be clarified and dealt with.
An experienced member of the team at Kingsgate Insolvency will be appointed to chair the meeting.
The IVA will be approved if 75% by value (£) of the votes received are in favour of the IVA. This means that any creditors who do not vote will still bound by the IVA.
After the IVA has been approved
Once the IVA is approved you will receive a copy of the report confirming this including details of any modifications which you may have agreed to.
An Insolvency Practitioner at Kingsgate will be responsible for overseeing the IVA but on a day to day basis an experienced member of the Kingsgate team will be your point of contact. You make ONE payment each month into a special account set up to receive your payments.
If you own your home you may be expected to try and obtain a remortgage before the end of the IVA. You will not be expected to sell your home and if you are able to obtain a remortgage this must be for an amount which is affordable for you. If it is too expensive for you to obtain a remortgage or you are simply unable to find a lender willing to provide a remortgage the IVA may instead be extended for up to 12 months during which time you would continue the monthly payments.
At the end of the IVA the remaining unsecured debt will be written off leaving you completely debt free.
What are the costs and charges of an IVA and how are these paid?
IVA - Initial Fee
If an IVA is recommended as the most suitable solution for you, and you decide to proceed, Churchwood Financial Ltd will charge a fee which will be no more than twice your monthly disposable income figure as calculated in our comprehensive review of your personal financial circumstances. This fee covers the cost of the financial review, processing the associated paperwork and the preparation and submission of your case to the Insolvency Practitioners. Within the Churchwood Finance group, IVAs are managed by Churchwood Financial (Management) Limited trading as Kingsgate Insolvency.
IVA – Insolvency Practitioner’s Fees
There are 2 types of fees charged by the Insolvency Practitioner.
The amount of the fees varies according to your individual circumstances and the fees will not be charged until they are agreed with you. The fees will also be agreed with your creditors when the IVA has been approved.
Nominee’s Fee
This fee covers all the work which is done leading up to your proposal being considered by your creditors.
The IVA proposal - this is the document which explains why you are unable to pay your debts and includes full details of your financial position. It explains how much you are proposing to pay towards your debts and the proposed costs of the IVA.
The meeting of your creditors – This is a meeting arranged by the Nominee for your creditors to consider your proposal. The Nominee will prepare a report recommending the proposal for acceptance based on the Nominee having reviewed your proposal and the documents which confirm the contents of the proposal are accurate such as wage slips, creditor statements, house valuation reports etc.
Changes to the proposal –The Nominee will consider with you any changes requested by creditors which are required in order to secure their acceptance of the proposal and will advise you whether you should accept the changes or consider an alternative approach to managing your debts.
The Nominee's fee charged by Kingsgate Insolvency is likely to be in the range of £1,000 to £2,000 plus VAT depending on the amount you are proposing to pay into the IVA.
Supervisor’s Fee
This fee covers all the work which is done after the proposal is approved in supervising the IVA and paying your creditors until the IVA is concluded.
Income Contributions. The Supervisor will check that you are making payments of contributions on time at the correct amounts. Each year the Supervisor will review your income and expenses.
Asset Realisations – If you are proposing to introduce any assets into the IVA by, for example, a remortgage, the Supervisor will check that this is done in accordance with the terms of the IVA.
Creditors – the Supervisor will check that the claims of your creditors are correct and will then arrange to make regular repayments to your creditors during the course of the IVA.
Changes in financial circumstances – If your circumstances change and you need to ask creditors to agree to vary the IVA the Supervisor will help you through this process.
The Supervisor's fee charged by Kingsgate Insolvency will vary depending on how much you propose to pay into your IVA and also on the amount creditors agree should be charged. Typically the Supervisor's fee will be in the region of 15% plus VAT of the payments you make into your IVA after payment of the Nominee's fee, and it is likely to be in the range £1,500 to £5,000. An illustration of the fees and expenses payable in a typical IVA is set out below.
Example of fees and expenses payable in a typical IVA*
Total payments by the borrower into the IVA 60 x £300 per month = £18,000
Nominee’s fee = £1,763
Supervisor’s fee = £2,860
Supervisor’s expenses £290
Total fees and expenses (included in the above mentioned payments) = £4,913
Total distributed to creditors under the IVA = £13,087(44%)
Total debt taken into the IVA = £30,000
Total debt effectively written off on completion of the IVA = £16,913 (56%)
*This example is based on a typical case where a client has unsecured debts totaling £30,000, little or no equity in property and completes an IVA over 60 months. All payments are inclusive of VAT where appropriate.
Key points about our fees:
We will explain the fees and expenses we propose to charge in a letter to you and ask you to confirm your agreement to these fees before we charge for any work on your behalf.
If your IVA is not approved by your creditors, you will be liable for any costs already incurred although we will restrict these costs to a maximum of 3 months proposed IVA contributions. If your IVA is approved the fees will be paid from the monthly contributions you pay into the IVA. This means that your creditors will bear the costs of the fees and for this reason the fees which we seek to charge may be varied (with your agreement) by your creditors before the IVA is approved.
Both the Nominee and the Supervisor will charge expenses they incur in addition to their fees. The expenses payable will be estimated at the commencement of the IVA but the final amount of these expenses may vary from this estimate.
Once you enter into an IVA it is important to keep up the proposed payments. If you do not keep up the proposed payments the IVA may fail. During the first few months of the IVA, your payments into the IVA will be used to pay the Nominee's fee and the Supervisor's ongoing fees before any payments are made to your creditors. If the IVA fails you will remain liable for payment of any outstanding balances to your creditors. Your debts are likely to have gone further into arrears.
IVAs do have some flexibility so that you may be allowed a small payment break due to unexpected expenses arising or difficulties at work.
You should also note that your credit rating is likely to be affected for up to 6 years after the IVA has been approved. You may not be able to obtain credit in the short term, and possibly in the medium to long term either.
Other product fees:
As a group, we offer a range of debt solutions which include Protected Trust Deeds (for Scottish Residents only) and Debt Management Plans, which may also be suitable for your circumstances. Please find costs associated with both solutions below;
What are the costs and charges of a Protected Trust Deed, and how are these paid?
Trust Deed - Initial Fee
If a Trust Deed is recommended as the most suitable solution for you, and you decide to proceed, Churchwood Financial Ltd will charge a fee which will be no more than twice your monthly disposable income figure as calculated in our comprehensive review of your personal financial circumstances. The fee covers the cost of the financial review, processing the associated paperwork and the preparation and submission of your case to the Insolvency Practitioners. Within the Churchwood Finance group, Trust Deeds are managed by Campbell Wallace Fraser Ltd.
Trust Deed – Trustee’s fees
The work required to draw up and administer a Protected Trust Deed is summarized below:
Preparation of the Trust Deed Document
This is the document which explains why you are unable to pay your debts and includes full details of your financial position. The preparation process will require us to confirm the contents of the Trust Deed are accurate by reviewing wage slips, creditor statements, house valuation reports and so forth.
The document will list all your realisable assets, all of your debts, provide a summary of your household income and essential spending and show what you can afford to pay towards your debts through the Trust Deed. The estimated costs of administering the Trust Deed are also detailed so that creditors can see what percentage of their debts is likely to be repaid.
Ensuring the Trust Deed achieves “Protected” status
As your debts are unlikely to be paid in full, your creditors are effectively bearing the costs of the Trustee's fees and therefore they may seek to alter the amount we propose to charge for the administration of the Trust Deed. Accordingly the Trustee will negotiate with your creditors to reduce the chances of them lodging an objection to your Trust Deed becoming Protected. If we cannot secure the required acceptance the Trustee will advise you of alternative approaches to managing your debts.
Administering the Protected Trust Deed
Following your Trust Deed being granted "Protected" status and becoming legally binding on all included creditors, it is the Trustee's role to ensure the terms of the Deed are followed for its entire duration with monies being collected and then distributed to your creditors. This will include the following steps:
Monitoring Income Contributions. The Trustee will check that you are making payments of contributions on time at the correct amounts. Each year the Trustee will review your income and spending to ensure the amounts paid are fair to creditors and affordable for you.
Asset Realisations. If you are proposing to introduce any assets into the Trust Deed, for example by a remortgage to release equity from a property, the Trustee will check that this is done in accordance with the terms of the Trust Deed.
Creditors. The Trustee will check that the claims of your creditors are correct and will then arrange to make regular repayments to your creditors during the course of the Trust Deed.
The amount of the fees varies according to your individual circumstances, and the amount of work that is required to set up and administer your deed. The fees usually range from £3000 to £5000 over the whole term. Your Trustee will be paid before any money is available to repay your creditors.
For illustration purposes your debts could look like this:-
Current Total debt owing to various unsecured loans and credit cards £15,000
Current Total Monthly repayment £350
After your affordability has been assessed and you have entered into a Protected Trust Deed
Your New Monthly repayment £190
Length of time to pay 36 months
Total debt repaid £6,840
Your monthly outgoings have been reduced by £160 and the outstanding £8,160 is written off with no further interest or charges incurred!
Key points about our fees:
We will explain the fees and expenses we propose to charge in a letter to you however any changes will be negotiated with your creditors when annual reports are generated after the signing of the Trust Deed.
If your Trust Deed does not achieve "protected" status we will continue to take monthly contributions to cover the set up costs of the Trust Deed and the Trustee will then decide what route your agreement should take.
If your Trust Deed becomes "Protected", the Trustee's fees will be deducted from the contributions you pay into the Trust Deed. The Trustee will also deduct any outlays that are incurred during the administration of your Trust Deed. The outlays payable will be estimated in the Trust Deed document itself but the final amount of these outlays may vary from this estimate.
Once you enter into a Trust Deed it is important to keep up the proposed payments. If you fail to do so, the Protected Trust Deed may fail, and result in your sequestration or you may be handed back to your creditors without discharge from your debt. Your initial payments will be used to pay the Trustee's fees and expenses incurred before any payments will be made to your creditors. If the Trust Deed fails you will remain liable for payment of any outstanding Trustee's fees and the balances of your debts which are likely to have gone further into arrears.
Your credit rating is likely to be affected for up to 6 years. You may not be able to obtain credit in the short term, and possibly in the medium to long term either.
Protected Trust Deeds do have some flexibility should your circumstances change, and the Trustee will provide guidance to you should the need arise.
Debt Management Fees
There are two fees associated with a Debt Management Plan.
1) The initial or “Setting up” fee
This fee varies depending on the complexity of your case, and will be no more than two times your monthly payment into the plan.
The fee covers the following work relating to the creation of your individual debt management plan:
- A comprehensive analysis of your financial circumstances, income and expenditure.
- Drawing up proposals for reduced repayments to your creditors based on what you can actually afford to repay.
- Compiling a financial statement on your behalf for presentation to your creditors.
- Submitting the proposals and financial statement to all your creditors and negotiating with them to establish a programme of reduced repayments.
Please note that as the initial fee is not paid to your creditors, you will go into (or further into) arrears which may affect your credit rating.
2) The monthly management fee
This amounts to 16.99% of your monthly payments into the plan. The minimum payment is £37.50 and the maximum £100.
The monthly management fee covers the ongoing maintenance and administration of your plan including:
- Collecting your monthly payments and distributing them amongst your creditors in accordance with the agreement.
- Communicating with creditors on your behalf including responding to any queries or correspondence they may send to you.
- Drawing up and sending to you a monthly confirmation of payments made to your creditors.
- Providing you with a named point of contact to support you and answer any queries you may have throughout the term of your plan.
- Contacting you quarterly (or monthly if you would prefer) to review the progress of the plan and ensure that it continues to meet your financial circumstances.
- Maintaining a comprehensive record of your plan so that any queries from creditors can be resolved by us quickly and simply.
What if I change my mind?
If, having decided to enter into a debt management plan, you then change your mind, we provide you with a cooling off period of 10 working days from the day you receive a copy of our terms and conditions. If you cancel the agreement within that cancellation period, you will receive a full refund of all the fees you have paid to us.
If you change your mind after the cooling off period has expired, you will still be able to withdraw from the plan, but you will not be entitled to receive a refund of the fees paid for the work we have undertaken.
Rescheduling debt may affect your credit record for up to 6 years and may lead to an increase in the total sum to be repaid.
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