Debt Management or IVA: Which is best?

The crucial question.

Do you opt for a formal repayment plan by using an IVA or, instead, opt for an informal Debt Management Plan?

Personal Circumstances

Without doubt it will be your personal circumstances that have a major bearing on the outcome of this decision.

Both debt solutions have their advantages and disadvantages which, when compared, makes them very different from one another. This enables them to provide different degrees of help for different degrees of financial problem.

So coming to recognise these differences will help you enormously, if you're trying to choose between them.

Here are the general differences between the IVA solution and a Debt Management Plan.

Legal Status

IVA: The IVA is a 'formal' debt solution, which means that, once it's been accepted by the necessary majority of creditors, all creditors are then legally bound by its terms.
Consequently, creditors are legally obliged to stop legal action for the recovery of the debt, stop charging interest, stop late payment charges and refrain from all correspondence with the IVA applicant.

DMP: Unfortunately, because the Debt Management Plan is an informal debt solution it cannot guarantee any of these benefits.


IVA: The IVA has a fixed repayment term of, normally, 5 years. During this time the applicant makes payments into the IVA fund, from which creditors are paid. After the pre-agreed fixed time period is completed the IVA terminates.

DMP: The Debt Management Plan has a flexible repayment term which is determined by the size of the debt and the amount of money being repaid each month and it continues until all the debt has been repaid.

Debt write-off

IVA: Under the standard terms of the IVA, any debt left unpaid when IVA terminates must be legally written-off by the creditors.

DMP: A Debt Management Plan must continue until the whole debt has been repaid.

Legal Strength

IVA: The IVA acts as a legal alternative to Bankruptcy and, once agreed, creditors forfeit their right to make the applicant bankrupt. As a result, the IVA protects property and other assets that would be vulnerable in the bankruptcy process.

DMP: Debt Management Plans do not have the power to legally bind creditors to any degree, therefore, if a creditor was particularly determined they could continue with legal action which could, in a worse case scenario, end in bankruptcy proceedings.


IVA: An IVA is a legally binding agreement with your creditors and, as such, it is not very flexible. Once you've accepted the terms your creditors will expect you to keep to the agreement. There are options available to the Insolvency Practitioner if you hit problems whilst in the IVA which include allowing reductions to your payments or even a 6 month payment break if necessary.

DMP: Debt Management Plans are very flexible because you are not under any binding agreements with your creditors. Therefore, your payments can be increased or reduced almost at will.

Fees and Costs

IVA: An IVA's costs are built into the monthly contributions being paid into the IVA fund.

DMP: A Debt Management Plan's costs must be paid by the applicant.

Debt levels

IVA: IVAs tend to be very good at dealing with high levels of debt and, normally, the higher the debt level the better the benefits of using an IVA.

DMP: Debt Management Plans tend to favour smaller levels of debt, where there is a realistic possibility of repaying the debt within 6 years.

Homeowner considerations

IVA: IVAs provide legal protection from creditors and, as a result, creditors forfeit the right to take legal action to force the sale of a property.

DMP: Debt Management Plans are informal agreements, therefore, you are not required you to disclose what assets you own. If your creditors don't know about your property you are not obliged to tell them but, if your creditors do know you own property, an 'informal' Debt Management Plan can't offer protection against legal action and bailiffs.

Short term debt problems

IVA: An IVA is a fixed term repayment plan of normally 5 years. If you can afford to repay your debt in full within that term, then an IVA would not be appropriate.

DMP: If you have a reasonable expectation that you will repay your debts in full within a reasonable time frame, then a Debt Management Plan will allow you to do so.

Take Professional Advice

As you can see from the basic comparison above, there are some fundamental differences between the two solutions and, on paper, the Debt Management Plan tends to appear less favourable.

But Debt Management Plans do provide a very useful platform for temporary, or short term, debt problems particularly when caused by sudden changes in circumstances, like redundancy or temporary reduction in income.

But it can be a very difficult choice to make, and one that deserves to be given serious consideration.

That's why it's always a good idea to talk to My IVA Adviser, the IVA specialists, before you commit yourself to either solution.

If you would like to have a chat about your circumstances, or discuss any of the points above, simply call 0800 088 7503 or, alternatively complete the form below and one of our adviser will call you back at your preferred time.

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