IVA vs DMP: Which Debt Solution Is Right for You?

An IVA is a formal, legally binding debt solution. A DMP is an informal arrangement with your creditors.

The right option depends on your debts, income, assets, household budget and how quickly you need to become debt-free.

IVA vs DMP: Quick Comparison
What Is an IVA?
What Is a Debt Management Plan?
What Is the Main Difference Between an IVA and a DMP?
IVA vs DMP and Your Credit File
IVA vs DMP: Cost and Payments
Can You Keep Your Home?
Which Is Better: IVA or DMP?
Which Option May Suit Different Situations?
Questions to Ask Before Choosing
Frequently Asked Questions

IVA vs DMP: Quick Comparison

The table below highlights some of the main differences between an IVA and a Debt Management Plan.

Feature	IVA	DMP
Legal status	Formal and legally binding	Informal arrangement
Debt write-off	Qualifying debt may be written off after successful completion	Normally no planned write-off
Typical length	Usually 5 or 6 years	No fixed term
Creditor protection	Creditors included in an approved IVA are legally bound by it	Creditors are not legally bound by the plan
Monthly payments	Based on what you can reasonably afford	Based on what you can reasonably afford
Credit file	Normally remains on your credit file for 6 years from the start	Missed payments, defaults and payment arrangements can affect your credit file
Public register	Yes, on the Individual Insolvency Register	No
Interest and charges	Normally dealt with under the terms of the IVA	Creditors may agree to freeze them, but they do not have to
Flexibility	Less flexible because it is legally binding	Generally more flexible
Home and assets	Assets and home equity are considered	There is generally no requirement to release home equity

What Is an IVA?

An Individual Voluntary Arrangement, usually called an IVA, is a formal agreement between you and your creditors.

An IVA is arranged and supervised by a licensed Insolvency Practitioner. You agree to make affordable payments towards your debts for the duration of the arrangement.

For an IVA to be approved, creditors representing at least 75% of the value of the debts that vote must vote in favour of the proposal.

Once approved, the IVA becomes legally binding on the creditors included in the arrangement.

Most consumer IVAs run for five or six years, although the exact length and terms depend on your circumstances and the proposal agreed with your creditors.

If you successfully complete the IVA, qualifying debts included in the arrangement that remain unpaid can normally be written off.

For a more detailed explanation, see our guide to what an IVA is and how IVAs work.

What Are the Advantages of an IVA?

An IVA may be suitable if you:

Have debts that you are unlikely to be able to repay in full within a reasonable period
Have a regular income from which you can make affordable payments
Need a formal arrangement with your creditors
Want the possibility of qualifying debt being written off at the end
Need greater protection from creditors once the IVA is approved
Want a structured repayment arrangement with a defined end point

What Are the Disadvantages of an IVA?

An IVA is a serious financial commitment and is not suitable for everyone.

It is legally binding
It affects your credit file
Your details are recorded on the Individual Insolvency Register
Your income, expenditure and assets will be assessed
Home equity may affect the terms of your IVA
There are fees for setting up and administering the arrangement
You must maintain the agreed payments and comply with the terms of the IVA

You should understand the advantages, disadvantages and alternatives before deciding whether an IVA is right for you.

Read our full guide to the pros and cons of an IVA.

What Is a Debt Management Plan?

A Debt Management Plan is an informal arrangement designed to help you repay your non-priority debts at a rate you can afford.

A DMP can be arranged yourself or through a debt management provider. Your income and expenditure are normally assessed to establish an affordable monthly payment.

The payment can then be divided between the creditors included in the plan.

Unlike an IVA, a DMP is not legally binding. This means your creditors do not have to accept the arrangement or continue with it.

What Debts Can a DMP Include?

A DMP is generally used for non-priority unsecured debts such as:

Credit cards
Personal loans
Store cards
Overdrafts
Catalogue debts
Other unsecured debts

Priority debts, such as certain council tax arrears, rent or mortgage arrears and some fines, normally need to be dealt with separately.

What Are the Advantages of a DMP?

A DMP may be suitable if you:

Can repay your debts in full over time
Need to reduce your monthly payments
Want an informal solution rather than a formal insolvency procedure
Expect your financial circumstances to improve
Want greater flexibility to change or end the arrangement

What Are the Disadvantages of a DMP?

There are some important limitations to consider.

Creditors do not have to accept your proposed payments
Creditors do not have to freeze interest or charges
Creditors may still take collection or legal action in some circumstances
There is no fixed completion date
You will normally need to repay the full amount you owe
A low monthly payment could mean that your debts take many years to clear

What Is the Main Difference Between an IVA and a DMP?

The biggest difference between an IVA and a DMP is the level of legal protection they provide.

An IVA is a formal, legally binding agreement. Once approved, creditors included in the IVA are bound by its terms.

A DMP is informal. It relies on creditors agreeing to the proposed repayment arrangement and does not provide the same legal protection as an IVA.

This means an IVA can provide greater certainty, but it also comes with greater restrictions and responsibilities.

A DMP can provide more flexibility, but there is less certainty because creditors are not legally required to cooperate.

IVA vs DMP and Your Credit File

Both an IVA and a DMP can affect your ability to obtain credit.

An IVA is recorded on your credit file and will normally remain there for six years from the date the IVA starts.

An IVA is also recorded on the Individual Insolvency Register while the arrangement is active and for a period after it ends.

A DMP itself is not an insolvency entry on the public register. However, missed payments, defaults and arrangements with creditors can be recorded on your credit file and may affect your ability to obtain credit.

If you are planning to apply for a mortgage, rent a property or obtain significant finance, it is important to consider the potential impact before entering either arrangement.

Read more about IVAs and renting and IVAs and car finance.

IVA vs DMP: Cost and Payments

The amount you pay each month under either solution depends on your individual financial circumstances.

With an IVA, your Insolvency Practitioner will assess your income and reasonable household expenditure to establish what you can afford to contribute.

The fees for setting up and administering the IVA are normally paid from the contributions made under the arrangement.

With a DMP, the amount you pay is also based on affordability. Some organisations provide DMPs free of charge, while commercial providers may charge fees.

If you are considering a DMP, check whether the provider charges a fee and how much of your monthly payment will actually be passed to your creditors.

Will Interest Be Frozen?

This is another important difference.

With an IVA, the treatment of interest and charges is governed by the terms of the arrangement once it has been approved.

With a DMP, creditors may agree to stop interest and charges, but they are not automatically required to do so simply because you have entered a DMP.

If interest continues to be added, it can significantly increase the time it takes to repay the debt.

Can You Keep Your Home With an IVA or DMP?

If you own your home, this is an important consideration when comparing an IVA and a DMP.

With an IVA, your assets and any equity in your property will be taken into account when your circumstances are assessed. The terms of the IVA may include provisions relating to your home equity.

This does not necessarily mean that you will have to sell your home, but you should understand how home ownership could affect your proposed IVA before agreeing to it.

A DMP does not normally require you to release equity from your home because it is an informal repayment arrangement.

However, your mortgage and other household costs will still be considered when working out what you can afford to pay.

Read our guide to IVAs and your home for more information.

Which Is Better: IVA or DMP?

There is no single answer to whether an IVA or DMP is better.

The most suitable option depends on your individual circumstances.

An IVA May Be More Suitable If:

You cannot realistically repay your debts in full
Your debts are likely to take many years to repay through an informal arrangement
You have a stable income and can afford regular monthly payments
You need a formal arrangement with your creditors
You want the possibility of qualifying debt being written off after successful completion

A DMP May Be More Suitable If:

You can realistically repay your debts in full
You need lower monthly payments
You want a flexible arrangement
You do not want to enter formal insolvency
You expect your financial circumstances to improve

Remember that neither solution should be chosen simply because the monthly payment appears lower. You should consider the total amount you are likely to repay, how long it will take and the restrictions that apply.

Which Option May Suit Different Situations?

Your situation	Options to consider
You can repay your debts in full over time	DMP or another repayment solution
You cannot repay your debts within a realistic period	IVA, DRO or bankruptcy, depending on your circumstances
You have low spare income and few assets	A DRO may be worth considering if you meet the criteria
You own a home and want to avoid bankruptcy	An IVA and other options should be considered carefully
You need maximum flexibility	A DMP may be more suitable
Creditors are taking enforcement action	Urgent debt advice is recommended as an IVA, DRO, bankruptcy or Breathing Space may be relevant depending on the circumstances

Frequently Asked Questions

Is an IVA better than a DMP?

Not necessarily. An IVA and a Debt Management Plan (DMP) work in very different ways. An IVA is a formal, legally binding insolvency solution that can write off qualifying unsecured debt when the arrangement is completed. A DMP is an informal repayment arrangement where you normally repay your debts over time.

The right option depends on your circumstances, including your income, debts, assets and ability to maintain affordable payments.

Does a DMP write off debt?

No. A DMP does not normally write off your debt. Instead, you make affordable payments towards your debts, usually until they have been repaid in full.

Does an IVA write off debt?

An IVA can write off some qualifying unsecured debt if you successfully complete the arrangement. The amount written off depends on your circumstances and the terms of your IVA.

Does a DMP affect your credit rating?

A DMP can affect your credit file because you may be paying less than the contractual payments originally agreed with your creditors. Your creditors may also record missed or reduced payments.

How long does an IVA last?

A consumer IVA will commonly last five or six years, although the exact length depends on the terms of the individual arrangement.

How long does a DMP last?

There is no fixed length for a DMP. It normally continues until your debts have been repaid, so the timescale depends on how much you owe, how much you can afford to pay and whether interest and charges continue to be added.

Can I keep my home with an IVA or DMP?

It can be possible to keep your home with either solution, but the rules are different. An IVA may involve an assessment of the equity in your property, particularly towards the end of the arrangement. A DMP does not normally involve transferring or releasing home equity, although your wider financial circumstances will still be considered when deciding whether it is suitable.

Will an IVA stop creditors contacting me?

An IVA is legally binding on creditors once it has been approved, so creditors included in the arrangement must generally deal with your debts in accordance with its terms. This can provide protection from individual recovery action covered by the IVA.

Can I change from a DMP to an IVA?

Potentially, yes. If your circumstances mean that a DMP is no longer suitable, an IVA may be considered as an alternative. You would need to have your circumstances assessed to determine whether an IVA is appropriate and affordable.

Check Your IVA Options

This guide is for general information and is not a substitute for personalised debt advice. An IVA is a formal insolvency procedure and may not be suitable for everyone.