Hello,
The main difference between an IVA and a Debt Management Plan (DMP) is that an IVA is a formal and legally binding agreement whereas a DMP is an informal solution to debt.
Debt Management is undertaken by means of an analysis of your outgoings and other priority debts such as mortgage payments, utility bills, council tax and day to day living costs in order to reveal how much disposable income you have available for paying back your debts.
A debt management representative acting on your behalf will then initiate informal negotiations with your creditors in order to cut or freeze interest rates and achieve more affordable repayments that are better suited to your current financial situation.
You will then pay this amount to your debt management company who are responsible for distributing payments to your creditors at the new agreed rate.
On the other hand an IVA (Individual Voluntary Agreement) is a formal agreement that is legally binding between you and your creditors that has been drawn up by a licensed insolvency practitioner.
The IVA process determines the percentage of your debts that will be repaid to your creditors and at the end of the agreement any remaining debts are written off, leaving you debt free.
Once creditors have agreed to the terms of an IVA, they cannot change their minds about how much should be repaid. This provides legal protection from your creditors, that does not have the stigma and implications of bankruptcy.
The severity of your debt problems and your personal circumstances dictate the best solution for you. It is important that you receive sound advice from experienced debt counsellors to ensure that you take the best path towards a debt free future.
Kind regards,
Julia Simavi
Shortlisted for Best UK Debt consultant by Credit Show 2007
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