Debt Management Plan or an IVA?

Summary: This paper looks at the comparison between a Debt Management Plan (DMP) and an IVA exploring the similarities and differences.

A DMP and an IVA are both debt solutions involving an affordable monthly payment to cover unsecured debts. However there are important differences.

Am I insolvent?

An IVA is a debt solution involving insolvency. It has to be presented to creditors through a licensed Insolvency Practitioner (IP) and the name and address of the debtor appears on an Insolvency Register. Being insolvent means that the debtor's unsecured debts are more than their assets (e.g. equity in property) and the debtor cannot afford to repay their debt in a meaningful time period. Not everyone therefore qualifies for an IVA, and therefore a repayment plan such as a DMP becomes necessary.

Can I pay the whole debt back?

An IVA involves repaying as much of the debt back as possible but within a limited time frame - usually 5 years. A DMP involves the repayment of the whole debt but at an affordable rate. For total debts less than £10,000 - an IVA is not possible and a DMP is necessary (or bankruptcy).

Am I looking for a legal solution?

An IVA is a formal, legal arrangement overseen by an IP. For the duration of the IVA, the IP will determine an affordable repayment level and will insist that any extra funds are paid into the IVA (eg inheritance, lump sum etc) and any releasable equity from a property is also made available. A DMP is an informal arrangement usually organised and managed through a DMP company. There is more flexibility regarding lump sums, and because the whole debt is being repaid, there is no question of equity release. If a debtor is concerned that their property is at risk of creditor action, then an IVA provides legal protection for the debtor.

Which is best for me?

For some the choice is obvious. They may not qualify for an IVA (debt less than £10,000; too much equity in property), whilst others have a preferred option due to the differences outlined above. The fixed time limit of an IVA holds great attraction for some, whilst others prefer the flexibility of a DMP. There is of course no right answer. It's about understanding which solution best fits your individual circumstances and it is likely that talking to a debt advisor will clarify that choice.

The above is provided as information only. does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.