This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. Before considering an IVA as a debt solution, please make sure you fully understand the risks involved when entering an IVA.
As we’ve mentioned previously, there are a lot of misconceptions around IVAs. We frequently hear from people who think they’re on an IVA, when in reality they’re not.
There’s also a lot of inaccurate information about IVAs around the web so to try and put these untruths to rest (and to tie in with the 25th anniversary of the introduction of IVAs) we’ve put together a guide detailing the 12 most obvious differences between an IVA and a debt management plan (DMP).
IVA and DMP: 12 differences
- An IVA is a formal arrangement whereas a DMP is an informal agreement between you and your creditors.
- An IVA is less flexible than a DMP, although you can still vary your payment up to 15% on an IVA. Any larger variations may have to be referred to your creditors for them to vote on the decision. DMPs are more flexible, and within reason you can change your payments whenever necessary.
- An IVA will stop all interest and charges. On a DMP there is no guarantee that this will happen and creditors can continue to add them.
- An IVA has a guaranteed end date. This is usually after 5 years. It can carry on for an extra year, if for example you were required to remortgage and this is no longer an option. Because of potential for interest and charges being levied by creditors, there is no guaranteed end date for a DMP.
- If you opt for a DMP with a free debt help charity there aren’t any administration fees to pay; with an IVA, there are fees involved.
- You can administrate a DMP yourself or choose a third party to deal with your creditors on your behalf. On an IVA you must use a licensed Insolvency Practitioner.
- If you embark on an IVA your IP will check your financial circumstances. A DMP provider would only usually ask for proof of your income and proof of your debts.
- There’s no official minimum amount of debt for a DMP, although this will depend on your DMP provider and your circumstances. The lower limit for an IVA is usually around £15k.
- Creditors don’t have to accept a DMP agreement. We usually recommend that you send the payments anyway. For an IVA to go ahead 75% of your creditors (by debt value) have to agree to the proposal.
- Once an IVA goes ahead, all creditor contact will stop. However on a DMP creditors can continue to chase you for extra payments and can follow the standard debt collection procedure.
- Every IVA is public information and entered on to the insolvency register. There’s no equivalent for DMPs.
- Finally, an IVA is a form of insolvency where a percentage of your debt is written off. On a DMP you repay your debts in full.
I hope we’ve clarified the differences and pointed out how different IVAs are from DMPs – both have their pros and cons, and which solution is best for you depends on your situation alone..
This page doesn’t discuss all of the key benefits and considerations of IVAs or DMPs and you should always seek expert advice before deciding on which debt solution is right for you. You can read more about individual debt solutions on the StepChange website