IVA : The Pros And Cons Of IVAs vs Debt Management Programmes

To help you decide which of the debt solutions you prefer, here are the main Pros and Cons of each choice.


There are essentially two types of Debt Management programmes.

Both are considered ‘informal’ arrangements.

The first type is ’self help’ Debt Management.
This is where a person contacts all their creditors, explains to them there is a problem with their repayments, and then arranging a new monthly repayment directly with each creditor.

This can be a very stressful exercise, made all the more difficult when the number of creditors are multiplied, however there is the advantage of not having to afford Debt Management fees out of your repayments, and therefore your creditors will receive all the money you can afford to pay. This in turn will reduce the time it will take to pay back your debts.

The second type is a third party or commercial Debt Management Programme.
This is where a person contacts a Debt Management company, notifies them of all their creditor’s details and respective debts to each creditor, and arranges to make monthly repayments to the Debt Management company. The company then contact the creditor on behalf of the person, explain there are problems, and pass on the repayments for their client.

This they do, but only after they have deducted a monthly management fee, usually 15% to 20%.

This has the effect of reducing the amount of money the creditor receive each month, and therefore lengthens the time needed to repay the debts.

The Debt Management company will also charge a set-up fee, normally equal to the person’s first monthly payment. This has the effect of forcing their new client to miss a months repayments at the start of the programme.

Both of these Debt Management Programmes have a valid role to play in the debt solution market place, and deciding on which option is most suitable will be down to each individual case.

Because the Debt Management Programmes are informal there are other issues too:

  1. There will be a full repayment of the debts.
  2. The creditors will not guarantee to freeze the interest on the debts.
  3. The creditors are still able to challenge repayment of the debt, and can still take legal action if they wish.
  4. The debtors credit file will be seriously effected as the creditors will impose default notices against their debts.


The alternative to both these informal solutions is a formal arrangement.

It’s called an Individual Voluntary Arrangement (IVA).

An IVA or individual voluntary arrangement, is an agreement that gives a person with debts over £15,000 a real alternative to the two informal arrangements above, and Bankruptcy.

The Individual Voluntary Arrangement (IVA) is a legally binding agreement between the person in debt and his creditors. It is recorded at the court and also on the public register of IVAs within the DTi.

Here are some of the main points that are incorporated into the Individual Voluntary Arrangement (IVA), that are advantageous to the debtor:

  1. Individual Voluntary Arrangement (IVA) repayments are set at an affordable level.
  2. There is a fixed time for the repayments, which are normally no longer than 5 years.
  3. The Individual Voluntary Arrangement (IVA) protects the debtor from legal actions from the creditors.
  4. The Individual Voluntary Arrangement (IVA) protect the debtors assets from the creditors.
  5. For any debt that is not repaid after the Individual Voluntary Arrangement (IVA) is finished, the creditor are obliged to write it off.
  6. Individual Voluntary Arrangements (IVAs) are a suitable solution for people whose profession would bar them the chance to declare bankruptcy.

The purpose of the Individual Voluntary Arrangement (IVA) is to bridge the gap between Bankruptcy and solvency, and whilst offering the debtor protection from their creditors, it also allows them to repay what they can honestly and realistically afford to their debts.

It must be said that an Individual Voluntary Arrangement (IVA) is not an easy option, but in the correct circumstances, it is a very powerful solution.

By speaking to one of My IVA Adviser specialist Individual Voluntary Arrangement (IVA) advisers for free on 0800 088 7503 you can be sure that once they have all the relevant details of your personal circumstances the advice you receive will be solid.

In you would like further information on both Individual Voluntary Arrangements (IVAs) and Debt Management Programmes then take a look at our free guides which are packed with useful tips and advice.

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