Debt Management Plan vs IVA: what's the difference?

A DMP is an informal agreement between you and your creditors to repay your unsecured debts in full at a rate you can afford.

You make one monthly payment, which is shared between your creditors.

An IVA is a formal, legally binding agreement between you and your creditors.

You make fixed monthly payments over a set period, usually five to six years. At the end of the arrangement, any remaining included debt is written off.

• flexible payments that can change with your circumstances
• can be used as a temporary solution
• not recorded on a public register
• unlikely to affect your job or living situation
• you repay your debts in full over time

• legally binding protection from creditors
• interest and charges are frozen
• fixed repayment term (usually five to six years)
• any remaining included debt will be written off at the end

DMP
Payments are based on your budget and can be adjusted if your circumstances change. A DMP can also be used as a temporary solution if your situation is expected to improve.

IVA
Payments are usually fixed for the duration of the arrangement, so you’ll need to commit to paying a set amount each month. You may be able to change your monthly payment amount if your circumstances change but you may need to ask the creditors permission.

DMP
You repay your debts in full at a rate you can afford. Because payments are lower than your original agreements, it may take longer to repay your debts, but the plan is designed to help you clear your balance at a sustainable pace.

IVA
You make fixed monthly payments for a set period, usually five to six years.

DMP
We deal with your creditors on your behalf, but they may still contact you directly.

IVA
Creditors included in your IVA cannot contact you to demand payment or take further action.

DMP
If you keep up with your mortgage or rent payments, a DMP shouldn’t directly affect your living situation. However, it might be harder to remortgage due to the impact on your credit file.

IVA
If you own your home, you may be asked to release equity as part of your IVA, depending on your circumstances. If you rent, your current living situation is unlikely to be impacted.

DMP
A DMP won’t appear as a single entry on your credit file, but the debts included may be marked as being in an arrangement or you may get default notices. These records can remain on your credit file for up to six years.

IVA
An IVA will be recorded on your credit file for six years from the date it is approved.

DMP
A DMP is unlikely to affect your employment.

IVA
An IVA may affect certain professions, particularly roles in financial services, law or accountancy. If you’re unsure, you should check with your employer.

DMP
We’ll ask your creditors to freeze interest and charges, but this isn’t guaranteed.

IVA
Interest and charges are frozen once the IVA is in place.

DMP
A DMP is confidential and won’t be recorded on a public register.

IVA
Your IVA will be recorded on the public insolvency register while it is active. The entry will be removed 3 months after the IVA ends.

DMP
A DMP is an informal agreement. Creditors aren’t legally required to accept reduced payments or freeze interest.

IVA
An IVA is legally binding. Once approved, all included creditors must follow its terms and can’t take further legal action.

The right solution depends on your personal circumstances.

A DMP may be suitable if:

• you can’t afford your current payments but could repay your debts in a reasonable timeframe
• your income or situation may change
• an IVA would impact your job

An IVA may be suitable if:

• you can’t realistically repay your debts in full
• paying off your debts on a DMP would take too long
• you can commit to fixed payments over five to six years

If your circumstances change, it may be possible to move from a DMP to an IVA or another solution.

We can review your situation at any time and recommend the most suitable option based on your current circumstances.

There’s a lot to consider before choosing a debt solution, and it’s important to get the right advice.

Getting impartial debt advice can help you understand all your options and choose the one that works best for you.