Legal Questions and Answers by
Jonathan Stones of John Barkers
Question :-
I wrote to you some weeks ago when the man who was buying my business by installments took
refuge from his creditors in an Individual Voluntary Arrangement still owing me £20,000.
The IVA then collapsed, leaving funds of only £25,000 to meet debts of £100,000 . . .and
the insolvency practitioners claimed fees of £20,000.
Your point about getting security is a useful warning. In fact we did have some security
and we decided the unsecured part of the debt was a risk we had to take.
I believe that where we went wrong was in agreeing to the IVA without realizing that its
costs may absorb most of the debtor's assets.
Thank you again for your help in this. I am now fairly hopeful that we will be able to
negotiate a significant reduction in the fees.
Answer :-
There is no doubt that the fees of insolvency practitioners can be high but an IVA is
often, from the creditors' point of view, the lesser of two evils. Initiating proceedings
that push the debtor over the edge into bankruptcy will probably mean that you're not
going to get any money anyway.
An IVA offers the prospect of getting some money back. It does not always work but at
least there is a hope.
I'm pleased that you seem to be making headway in negotiating a reduction of the fees that
have been claimed in you case. Good luck!
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