Fees and Your Credit Rating

Two separate things matter before you decide, and this page keeps them apart because they are not the same question. What a debt solution would cost you is one. What it would do to your credit file is the other. Some people are comfortable with the first and not the second.

What costs you nothing

Initial advice is free and covers talking to us, going through your circumstances and being told what your options are. That includes being told that a debt solution is the wrong answer for you, which happens often enough to be worth saying out loud.

If a free route suits you better, we refer you to a provider who offers it, and the referral costs you nothing.

Fees

Initial advice is free and covers finding out whether a debt solution may be right for you. Fees only arise if an Individual Voluntary Arrangement is put in place and you proceed with it. Other routes can have different charges, including the government application fee for bankruptcy.

What the fees pay for

Where an Individual Voluntary Arrangement is the route taken, the fees cover the preparation of your proposal and the administration of the arrangement for as long as it runs. They fall into three parts:

• The nominee's fee, for preparing your proposal and arranging the creditors' decision procedure.
• The supervisor's fee, for administering the arrangement after it has been approved.
• Disbursements, which are necessary costs such as registration and statutory insurance.

How the fees are paid

The fees are taken from the payments you make into the arrangement. They are not normally charged on top of your agreed monthly contribution, so the amount leaving your bank account each month is the figure you agreed, not that figure plus a fee.

That is the part people most often get wrong, and it matters: it means the fees come out of money your creditors would otherwise have received, rather than out of money you have to find.

Why there is no single figure on this page

Your creditors vote on your proposal, and they can change the fees when they do. The amounts that end up applying to you are the ones set out in your own proposal and approved in that vote, so a headline total published here would be a figure nobody has yet agreed to.

You will be given the actual figures, in writing, before you are asked to decide anything. If a fee is not written down and explained to you before you commit, that is a reason to stop and ask.

Credit rating

An Individual Voluntary Arrangement is recorded on your credit file for six years from the date it starts. It stays there for the full six years even if the arrangement itself finishes sooner.

During that period, obtaining new credit is likely to be harder, and where credit is offered it may be at a higher rate of interest. Some lenders decline applications outright while an arrangement is running.

The Individual Insolvency Register

Your arrangement also appears on the Individual Insolvency Register, which is public, for as long as it is active. The entry normally remains on the register for up to three months after the Insolvency Service is notified that the arrangement has ended.

Taking further credit

Your proposal will contain restrictions on taking further credit while the arrangement runs. Above the amount stated in your terms, you may need the written permission of your Insolvency Practitioner before borrowing.

After it ends

When the arrangement is completed you can ask the credit reference agencies to update the accounts included in it. The record of the arrangement itself normally stays visible until six years have passed from the date it started, not from the date it ended.

Routes that can carry no adviser or arrangement fee

A debt solution is not the only answer, and several routes cost nothing. Where one of these fits better than an arrangement with us, we say so and refer you free of charge.

• Breathing Space gives qualifying debts a legal moratorium, and a debt advice provider is prohibited from charging you a fee in connection with it. Our page on the Breathing Space scheme sets out what it covers and what it does not.
• A Debt Relief Order is set up through an authorised debt adviser, and free debt advice agencies can do that at no cost to you.
• A debt management plan can be arranged and run free of charge by the free-sector providers named below.

Before you decide

A debt solution is not suitable for everybody. It can affect your credit rating, your ability to borrow, your assets and your existing financial commitments, and it does not automatically stop every type of enforcement action.

The benefits, the risks, the fees and the alternatives will be explained to you before you decide whether to proceed. If any of that is unclear when you are asked to commit, ask again. If you are unhappy with how something was explained, our complaints policy applies.

Free independent advice

You do not have to take advice from us, and it is sensible to compare. Free, independent debt advice is available from MoneyHelper, which is backed by government, and from Citizens Advice, National Debtline and StepChange.

Who we are and how we are regulated is set out on about Bailiff Advice Centre; the basis on which the website is provided is in our terms and conditions.