Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA)?

Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA)?

dmp vs iva

What the difference is between a DMP (debt management plan) and an IVA (individual voluntary arrangement)?

Below we list some of the advantages and disadvantages of both.

A debt management plan is generally a good option when you have a low level of debt and can afford to repay this in full within a relatively short period of time.

What are the advantages?

  • It allows you to clear your debt without entering a formal arrangement
  • You only repay one affordable monthly repayment after taking into account your essential outgoings
  • All payments made are spread out fairly amongst your creditors
  • Your home and other assets are protected
  • The Debt Management provider will handle dealing with the companies you owe money to.
  • If you circumstances improve you can increase your repayments and repay your debt more quickly.
  • If your circumstances deteriorate you may be able to reduce your payments
  • There are DMP providers available who do not charge any upfront fees or ongoing costs
  • You can usually continue to trade (self-employed) when you enter a DMP
  • You can remain as a Limited Company Director and enter into a DMP

What are the disadvantages?

  • You will have to repay your debts in full. This could take a long time. We recommend that if this is to take longer than ten years then a DMP may not be the best option at dealing with your debts.
  • It is an informal agreement; the companies you owe money to do not have to accept the offer made, or freeze interest.
  • Creditors can continue to pursue you and enforce the debt by other means, for example petitioning for your bankruptcy
  • A DMP will affect your ability to get credit for six years
  • There are some type of debts that will not be included.

An IVA is generally a good option if you cannot repay all your debts in full (even by using a debt management plan).

What are the advantages?

  • It allows you to clear your debt within a fixed timescale – usually by a lump sum, or 5-6 years.
  • Majority of those who enter an IVA repay much less than what they owe
  • In the vast majority of cases your home can be protected from your creditors
  • It can ease stress and anxiety with dealing with debts and creditors
  • There are generally no upfront fees or costs
  • You can continue to trade (self-employed) when you enter an IVA subject to certain credit restrictions
  • You can remain as a Limited Company Director and enter into an IVA

What are the disadvantages?

  • You will have to change your bank account if you have an overdraft debt or any other debt owed to your bank that is being included in the IVA
  • If you do not keep to the repayment offer you made in your IVA then your IVA could fail
  • Your creditors must agree to your IVA proposal (75%+)
  • If your circumstances change and you cannot maintain your IVA repayments, your IVA could fail
  • An IVA will affect your ability to obtain credit for six years
  • There are some type of debts that cannot be included
  • Details of your IVA is held on the Individual Insolvency Register

What is my next step?

If you are worried about the cost and affordability of repaying all of your debts then call to arrange a no obligation chat with one of our experienced advisors today on 02890 393626.

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See If You Qualify For One Of Our Debt Options:
Total Sum Of Your Debt:
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How Many Creditors do you have?
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What Types of Debt Do You Have?
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Field is required!
Your Residential Status:
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You Qualify for a few different debt options.
Fill in the confidential form below and we will be in touch with you
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