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IVA vs DMP — which debt solution is right?

IVA vs DMP — comparing debt solutions

If you're struggling with multiple debts, two common solutions are an Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP). They work very differently.

Debt Management Plan (DMP)

A DMP is an **informal** agreement with your creditors to pay reduced monthly amounts.

| Feature | Detail |

|---------|--------|

| **Cost** | Free through charities like StepChange |

| **Duration** | Until debts are repaid (can be many years) |

| **Legal status** | Informal — creditors don't have to agree |

| **Monthly payment** | Based on what you can afford |

| **Interest** | Creditors may freeze interest (not guaranteed) |

| **Credit impact** | Negative — defaults likely appear |

| **Assets** | Your assets are protected |

| **Can creditors chase?** | Technically yes, though most cooperate |

Individual Voluntary Arrangement (IVA)

An IVA is a **formal, legally binding** agreement managed by an insolvency practitioner (IP).

| Feature | Detail |

|---------|--------|

| **Cost** | IP fees deducted from your payments |

| **Duration** | Typically 5-6 years |

| **Legal status** | Legally binding — creditors must agree (75%+) |

| **Monthly payment** | Fixed, based on your disposable income |

| **Interest** | All interest frozen by law |

| **Credit impact** | Serious — 6 years on credit file |

| **Assets** | Home equity may need to be released |

| **Remaining debt** | Written off at the end of the IVA |

Which is better?

**A DMP may suit you if:**

Your debts are manageable with reduced payments

You want flexibility to change payments or end the plan

You don't want a formal insolvency record

Your debt total is relatively low

**An IVA may suit you if:**

You have significant debts (typically £10,000+)

You need the legal protection from creditors

You can commit to 5-6 years of payments

You want remaining debt written off at the end

What you could consider

**Always get free advice first** — StepChange (0800 138 1111) or National Debtline (0808 808 4000)

**Avoid paid debt management companies** — free alternatives exist

**Consider a DRO** if your debts are under £30,000 and you have very low income

**Consider bankruptcy** only as a genuine last resort

Tools that may help

Generate a Hardship Letter Check Debt Priorities Calculate Your Budget

Frequently asked questions

Can I do a DMP myself without a company?

Yes, you can contact creditors directly to arrange reduced payments. However, a free service like StepChange can handle all communications for you and may achieve better outcomes. Never pay a company to do this — free options exist.

Will an IVA affect my job?

Some roles in finance, law enforcement, and the military may be affected by an IVA. Check your employment contract and speak to a qualified advisor. For most people, an IVA does not affect their employment.

What happens if I can't keep up IVA payments?

If your circumstances change, your IVA can sometimes be modified. If it fails, your creditors can pursue you for the original debts minus what you've paid. Speak to your IP immediately if you're struggling.