How much does Insolvency cost?

This question doesn’t have a simple answer.

This depends on what process is being conducted and the complexity of the situation.

In personal insolvency cases where an individual is subject to bankruptcy or an Individual Voluntary Arrangement (“IVA”), the practitioners fee can be based upon time charged by the insolvency practitioner and their staff, but more regularly is based on percentages of realisations. In an IVA the supervisor’s fee is typically 15% of realisations that are achieved during that process.

In corporate appointments costs are agreed by the creditors. However, there can be different bases for agreeing those fees. It might be a fixed fee, a percentage of realisations or based upon time costs charged by the insolvency practitioner.

In all formal corporate insolvency procedures, with the exception of a CVA, the appointed Insolvency Practitioner is required to put forward a fee budget for approval by the creditors and once approved, that budget will act as a cap on the practitioner’s costs unless they seek creditor approval for a higher fee, which occurs usually in cases where the anticipated costs are higher than previously expected.

It is the creditors who have full control of the costs in the process, but what the costs will be depends on the time, complexity and basis agreed for those fees.

How do I pay for your services when I have cash flow problems?

An Insolvency Practitioner will realise the assets in a company e.g. balances due from customers, tools/equipment, or the assets of an individual e.g. contributions from your monthly income or your interest in the equity in your house, to cover the cost of the insolvency procedure. Subject to creditor approval of those fees, the IP’s fees and other agreed costs will be paid first from these realisations.

If the assets of the relevant company or individual are insufficient to meet the agreed costs, the IP may require the directors of the company or the individual to undertake to pay the agreed costs. However the IP will usually be prepared to allow the directors or individual a period of time to make these payments.

For more information, email advice@chamberlain-co.co.uk