IVA or Debt Management Programme?

The answer to this question should be determined by the personal circumstances of each individual case and, because each case will be different, there won't always be a simple answer to this question.

There will be times when the advantages of an IVA will be obvious when compared to a Debt Management Plan (DMP).

For instance, when the applicant needs legal protection from their creditors or is, perhaps, looking to benefit from some debt write-off.

But there will also be times when a DMP has the edge over an IVA, where perhaps the flexibility of a DMP offers the applicant more control.

For anyone to suggest one solution is always going to be the better than the other would be ridiculous. There is no doubt that a stable and well structured DMP can prove to be a very effective debt solution when dealing with smaller debts or short term repayment problems, whereas the IVA tends to favour those with larger debts.

Main Differences

There will always remain distinct differences between the two options and, to help you decide which option is best for you, here are the main differences for you to compare.

Benefits of an IVA over a DMP

  • Large Debts IVA's tend to be better at dealing with larger debt levels, normally, the bigger the better.
  • Fixed Time Frame An IVA has a fixed term, normally 5 years after which payments stop.
  • Debt Write Off Once payments stop, all outstanding debt is legally written off, even if still unpaid.
  • Provides Legal Protection Stops creditors taking action to seize assets, such as your home.
  • Legally Binding. An IVA binds all creditors into the agreement, even if they initially voted against it.
  • Stops Creditor Harassment. Creditors cannot contact you to demand increases in your payments.
  • Built-in Costs An IVA's costs are built-in to your repayments and covered by creditors if you successfully complete the IVA.

Benefits of a DMP over an IVA

  • Smaller Debts DMP's tend to be better at dealing with smaller debt levels, normally the smaller the better.
  • Flexible Repayments DMP's payments can be reduced or increased without seeking permission from the creditors.
  • Informal Agreement DMP's are informal agreements which means you are not legally bound to maintain payments
  • Flexible Time Frame DMP's have no fixed time frame, so the more you pay into a DMP the fast your DMP will complete.

The points above highlight the main differences between the two solutions and, as mentioned earlier, it can be pretty difficult to recognise which option would be best suited to your situation until you have spoken to a professional debt adviser.

Let us help you

With this in mind, we invite you to call us now on 0800 088 7503 for a 'no obligation' consultation. All calls are held in the strictest confidence and the advice you receive will be free.

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In accordance with the Financial Conduct Authority's guidance, please follow this link if you would like to read a free guide about In Debt - Dealing with your creditors
To find out more about managing your money and getting free debt advice, visit Money Advice Service , an independent service set up to help people manage their money.

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