IVA Secret 1
Open a new bank account before you start your IVA
This advice applies to people who owe money to the bank that holds their day to day account. The bank, once they discover that you are doing an IVA, may be tempted to take your salary lodgement in your main bank account to repay your loans and overdrafts. To avoid this scenario it is best to move the bank account to another bank before starting the IVA.
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IVA secret 2:
Don’t pay any “arrangement fees” for an IVA.
Debt management companies are middle men that find indebted customers for an insolvency practitioner. Some debt management companies are excellent and they provide a service by offering a free advice to many indebted people. However, the reason they do this is in order to get prospective IVA customers from which they earn large commissions. There are restrictions on Insolvency Practitioners advertising for business so a debt management company can funnel potential customers to their favored Insolvency Practitioners.
The debt management company makes money in two ways. Firstly they receive a commission from the Insolvency Practitioner or IP (recall that the IP is the name for the licensed professional somewhat like an accountant who sets up and supervises IVAs). Secondly, some debt management companies charge an “arrangement fee”. The sales talk can be quite slick and many debt laden individuals might consent to the arrangement fee without realizing that there are further insolvency practitioner fees to add on to that.
The arrangement fee is often pitched as the first two months of the IVA. For example, an IVA taking 5 years requires 60 payments in total (5 years multiplied by 12 months), which is done through a debt management company could take 62 moths two complete – the first two months payments being for the arrangement fees. Therefore by avoiding the arrangement fee on an IVA where the monthly payment was £750 you would be saving yourself a whopping £1,500!
Bottom Line: If you get a debt management company to arrange an IVA for you insist that you do not pay any arrangement fees.