Not sure which would be the best option for you? We’ll cover two of the most popular debt solutions: an IVA and a DMP.
What is an IVA (Individual Voluntary Arrangement)?
An Individual Voluntary Arrangement (IVA) is a debt solution that allows you to “freeze” your debt and agree to pay it back over a specified period, usually 5-6 years whilst protecting your assets. Any money you owe thereafter is written off.
An IVA is a legally binding agreement between you and your unsecured creditors, arranged and supervised by a licensed Insolvency Practitioner (IP). In short, you agree to pay back the maximum you can afford over a specified period of time, at the end of which your creditors agree to write off any remaining balances.
You can read more about IVAs here.
What is a DMP (Debt Management Plan)?
A debt management plan is an informal and flexible way of helping you manage your debts by paying them back in one, affordable monthly payment. A debt management plan involves us working out a budget with you which includes all of your essential household expenses such as your rent, mortgage, utilities, food shopping, etc. Any money left over will then be used to pay back your debts to your creditors.
You can read more about DMPs here.
How Will Each Debt Solution Affect My Credit File?
An IVA will stay on your credit file for six years from when it is agreed. In a DMP you will be paying less than the originally agreed payments, so eventually, your debts will default and that will be reported on your credit file.
What Are the Differences Between IVAs and DMPs?
Fees
- IVA: There are fees to pay when you enter an IVA. Those fees are paid out of the affordable monthly payments you agree to. It’s not a payment on top of the payment.
- DMP: A DMP with Angel Advance costs £50 for the first 6 months of your plan, then £39.50 per month every month after that. The fee is taken from your affordable monthly payment, so you don’t need to pay anything extra on top.
Creditor Contact
- IVA: Lenders cannot chase you for payment or take legal action.
- DMP: We’ll deal with lenders on your behalf. Once you’re in a DMP, they aren’t legally obliged to stop contacting you but most creditor contact tends to reduce.
Interest & Charges
- IVA: Interest and charges on your debts will be frozen.
- DMP: We’ll ask lenders to freeze interest and charges on your debts and in 99.48% of cases they will.
Duration
- IVA: An IVA usually lasts five or six years depending on your situation.
- DMP: It varies depending on how much debt you have and how much you can afford to pay every month. The aim is for you to clear your debts in a ‘reasonable’ amount of time.
Debt Write-Off
- IVA: Once your IVA is complete, any outstanding unsecured debt included in your IVA is written off.
- DMP: In a DMP, it gives you longer to pay back your debts in full so there is no debt write-off.
Car Ownership
- IVA: You will typically be allowed to keep your car as long as it’s not deemed to be too valuable.
- DMP: Having a car shouldn’t affect your lenders agreeing to a DMP.
Homeowners
- IVA: You won’t be forced to sell your home if you enter an IVA. But they may ask you to re-mortgage to release money so it can go towards your debts.
- DMP: If you keep up with your priority bills that would impact your living situation, there’s no reason why it would have a direct impact. However, a DMP does have an effect on your credit file so it’s worth thinking about if you are due to re-mortgage.
Public Register
- IVA: If you enter an IVA, your details will be recorded on the public insolvency register, and stay there until three months after your IVA ends.
- DMP: Your details won’t be recorded on the public insolvency register.
Am I Eligible for an IVA or DMP?
It depends on your personal circumstances. The best way to understand your options and see what debt solutions you qualify for is to get debt advice. You can use our free, online debt advice tool anytime, day or night. Or if you’d prefer, you can speak to the friendly and experienced debt advisers at Angel Advance to receive free, confidential debt advice via email, phone or WhatsApp today.
IVA or DMP: FAQs
Both an IVA and DMP can have an impact on your credit score, as you will be making reduced payments compared to what you originally agreed to.
- Individual Voluntary Arrangement (IVA): An IVA is recorded on your credit file for six years and will also appear on the Public Insolvency Register while it is in place.
- Debt Management Plan (DMP): A DMP is not recorded on a public register, but creditors will report arrears to the credit reference agencies, which will also be visible for six years.
Potentially. As a DMP is a flexible debt solution, if your situation changes, you may be able to switch to an IVA which could help you write off some of your debt sooner.
Always contact us first for free, professional debt advice. You don’t need to be a customer to speak to our debt advisers, we’re here to help find the right solution for you.
No, an IVA is a legally binding arrangement, so cancelling it would have serious consequences.
As a DMP is an informal debt solution, you can change your payment amount at any time provided a DMP remains a suitable solution for you.
Contact us to let us know and we will complete a review to find a new affordable payment, as well as negotiate your new payment with your creditors. It’s important to note that they do not have to agree to this.
If your situation changes during an IVA, your Insolvency Practitioner will provide you with advice on how to proceed.
