IVA vs DMP: Which Debt Solution is Right for You?
Compare Individual Voluntary Arrangements and Debt Management Plans to understand which solution best fits your financial situation.
Two Different Approaches to Debt Relief
Both IVAs and DMPs can help you manage unaffordable debts, but they work in fundamentally different ways. One is legally binding with formal protections, the other is informal and flexible.
Individual Voluntary Arrangement (IVA)
A formal agreement with your creditors to pay what you can afford for 5–6 years. After that, any remaining unsecured debt is legally written off — typically 50–70% of your total debt.
✓ Advantages
- Legally binding protection from creditors
- Up to 70% of debt written off
- All interest and charges frozen
- One fixed monthly payment
- Clear end date (usually 5–6 years)
- Keep your home in most cases
✗ Disadvantages
- Minimum debt ~£6,000 required
- Fees of £2,000–£5,000 over the term
- Listed on public insolvency register
- 6 years on credit file
- Must maintain payments or IVA fails
- Requires 75% creditor approval
Debt Management Plan (DMP)
An informal arrangement where you make reduced payments to creditors based on what you can afford. No debt is written off — you repay in full, but over a longer period.
✓ Advantages
- Flexible — can adjust or cancel anytime
- No minimum debt requirement
- Free options available (e.g. StepChange)
- Not publicly recorded
- Assets not at risk
- Can start immediately
✗ Disadvantages
- No legal protection from creditors
- Creditors can still pursue legal action
- Interest may continue (unless frozen by creditor)
- Takes longer to clear debt
- No debt write-off
- Relies on creditor goodwill
Side-by-Side Comparison
| Feature | IVA | DMP |
|---|---|---|
| Legally Binding | ✓ Yes | ✗ No |
| Debt Write-Off | ✓ 50–70% typical | ✗ None |
| Legal Protection | ✓ Full protection | ✗ No protection |
| Interest Frozen | ✓ Always | ~ If creditors agree |
| Typical Duration | 5–6 years (fixed) | 5–10 years (variable) |
| Minimum Debt | ~£6,000 | No minimum |
| Setup Costs | £2,000–£5,000 total | Free or ~£50/month |
| Credit File Impact | 6 years from start | 6 years from default |
| Public Record | ✗ Yes (insolvency register) | ✓ No |
| Flexibility | ✗ Fixed terms | ✓ Can adjust |
| Asset Protection | ~ Usually keeps home | ✓ No asset risk |
| Can Cancel | ✗ Difficult | ✓ Anytime |
Which Option Should You Choose?
The right solution depends on your circumstances. Here are common scenarios:
An IVA May Be Right If You:
- Have at least £6,000 in unsecured debt
- Need legal protection from creditors
- Want to write off a portion of your debt
- Have stable, regular income
- Want a clear end date
- Are facing legal action (CCJ, bailiffs)
- Can commit to fixed payments for 5–6 years
A DMP May Be Right If You:
- Have less than £6,000 debt
- Need flexibility to adjust payments
- Want to repay debt in full
- Have variable income
- Want to avoid formal insolvency
- Don't need immediate legal protection
- Want to keep it off public record
Important: Both IVAs and DMPs will affect your credit score. There is no way to resolve serious debt without some impact. The question is which solution gives you the best path forward based on your specific situation.
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