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IVA or a DMP? Which Is Best

An Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP) are two different forms of debt solution. There are advantages and disadvantages to both, but which one is best for you depends totally on your financial situation.

Researching debt management and debt solutions can be a minefield of information, from understanding what insolvency is and whether it’s necessary for you, to knowing what to expect from a repayment plan.

What Are IVAs and DMPs?

IVA — A formal, legally binding agreement with your creditors in which you agree to make payment towards your debts at an affordable rate for a set period of time. 

DMP — An informal agreement with your creditors to pay back all of your debt in monthly instalments. A DMP is not legally binding, therefore, creditors may change their mind about the agreement at any time.

Am I Eligible for an IVA or a DMP?

To apply for an IVA:

  • You must have a minimum of £5,000 worth of unsecured debt
  • You must owe at least two creditors
  • You must have an available monthly surplus of at least £85
  • You must be over the age of 18.

The application for a DMP is less specific in regards to criteria. You will likely qualify for a DMP if:

  • You can’t afford your existing unsecured debt repayments
  • You can still afford lower payments each month
  • You can afford to repay those debts in full within a reasonable time.

Is There an Up-Front Fee?

IVA — An IVA is prepared and supervised by an Insolvency Practitioner (IP), so there is a fee. There is a Nominee fee which is the fee for putting together the proposal and presenting it to your creditors. In addition to this, there is a Supervisor fee, which is the ongoing fee for managing your plan and liaising with your creditors. These fees are all included within your monthly payment, and agreed by your creditors, so you won’t be expected to pay anything upfront.

DMP — A Debt Management Plan can be set up by a charity, so it can be free of charge. However, some commercial providers will charge a setup fee to work out what you can afford to pay and negotiate this with your creditors. They will then usually charge an ongoing fee each month for managing your plan.

What Is an Insolvency Practitioner?

IVA — As an insolvency solution, IVAs are supervised by an Insolvency Practitioner (IP) who is licensed and authorised to act in relation to an insolvent individual.

DMP — Because a DMP is not an insolvency solution, a DMP is managed by a company/charity known as debt management plan operator or provider. They negotiate with your creditors and manage payments without the need for an IP.

How Long Does Each Debt Solution Last?

IVA — The number of monthly payments is fixed and usually runs for five to six years. This will depend on whether or not you are a homeowner and have equity in your property that can be released into the IVA. An IVA can be completed in less than 12 months if there is a lump sum settlement available.

DMP — A DMP usually takes much longer to repay debts as your monthly repayments are dramatically reduced but are still committed to paying off the entire sum of money owed. Because of the flexibility of this arrangement, you may end up paying back your  debt for a substantial amount of time.

How Much Are the Monthly Payments?

IVA — For an IVA, the monthly payments are calculated by your IP and will be dependent on the amount of money left over once your essential living costs have been deducted from your income.

DMP — A DMP is less rigid, although will still require you to budget for your affordable monthly contribution to creditors.

Can My Debt Be Written Off?

IVA — In an IVA, when you have made all of your monthly payments within the five or six year term of your plan, the rest of your debt will be written off. The amount written off will vary depending on your circumstances.

DMP — In a DMP you commit to repaying your debts in full, there is no debt write off

Which Debts Can Be Included?


  • Catalogue debt
  • Personal loans
  • Overdrafts
  • Credit cards
  • Gas and electric arrears
  • Council tax arrears
  • Water arrears
  • Payday loans
  • Store cards
  • Income tax and National Insurance arrears
  • Tax credit or benefit overpayment determined before the IVA
  • Debt to family and friends
  • Hire purchase and mortgage shortfalls after the sale of the asset
  • Rent arrears when you have left the property.


  • Personal loans
  • Bank or building society loans
  • Overdrafts
  • Money borrowed from family and friends
  • Catalogue, home-credit or in-store credit debts
  • Credit cards, store card debts or payday loans.

What Action Can Creditors Take Against You Within IVAs or DMPs?

IVA — As a legally binding agreement, your unsecured creditors cannot take any further action against you and cannot demand payment from you after your IVA begins. Interest and charges will be frozen so your debt level will not increase.

DMP — Action against you, such as county court judgement (CCJ), may be suspended once your debt management plan has been agreed. Some creditors may suspend interest and charges for a short period of time, although they can change their mind at any point and start adding it to your debt again and even continue the debt collection process. Find out more about this and what constitutes debt harassment.

Will an IVA or DMP Affect My Assets?

IVA — Once approved, because creditors cannot take further action against you, your assets are legally protected. This is one of the main advantages of an IVA.

DMP — A DMP does not offer any legal protection for your assets. Your creditors could decide to continue with their collection process, adding interest and charges to your account or even, send bailiffs to your home,  or petition to make you bankrupt, which could involve the loss of your assets.

How Will an IVA or DMP Affect Your Credit Rating?

Both an IVA and a DMP will affect your credit rating, which you can only start to rebuild once you have dealt with your debt.

IVA — The default added to your credit file at the start of your IVA will stay there for six years. IVAs usually last between five and six years so when you are finished with your IVA, the default will almost be ready to drop off your credit file. Once your IVA is complete, you will receive a Certificate of Completion as proof that you have successfully completed your arrangement. 

DMP — A DMP isn’t registered on your credit file but the reduced payments are likely to trigger your creditors adding a default to your credit file. As defaults remain on your credit file for six years, if this happens each month you are on a DMP, the default will stay on your file for another six years after you have finished.

Will My Debt Solution Be Public Knowledge?

IVA — An Individual Voluntary Arrangement will be listed on the Individual Insolvency Register, which is accessible to all if they wish to view it.

DMP — A Debt Management Plan is not public information, and people will only be made aware of it if you tell them.

In Conclusion

When deciding which debt solution is right for you, you should always seek expert advice before you make any rash decisions. Contact Debt Movement today to speak to one of our friendly and impartial guides about which debt solution could be right for you.

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