Can I Change from IVA to Debt Management Plan?

If you’re thinking about changing from an IVA to a Debt Management Plan, you’re not alone. Each month, over 170,000 people visit our website seeking advice on debt matters.

This article is here to help you understand:

•  What an IVA is and how it works.
•  What a Debt Management Plan is and how it can help.
•  When you might be able to switch from an IVA to a Debt Management Plan.
•  The pros and cons of making this change.
•  If you qualify for a Debt Management Plan.

We know that dealing with debt can be tough and confusing. But we’re here to help you make sense of your options and find the right solution for your situation. 

It’s important to note that, sometimes, you might be able to write off some debt. We’ll talk more about this later on.

Can I Change from IVA to Debt Management Plan?

Yes, but there are a few differences between these two debt solutions that can affect you in many ways. A DMP isn’t a formal agreement, so it doesn’t offer any protection to you, unlike an IVA.

There are different factors to consider when switching from IVA to DMP. These include:

1. Your debt amount

If you owe a significant amount, changing to a DMP might not be the best idea because, in a DMP, you will have to pay the debt in full. The plan has no provision for writing off debts, so you may find yourself paying more with a DMP than you would if you maintained your IVA.

2. Instalment duration

If you’re on an IVA, your instalment payment will only last for five years before your remaining unsecured debts will be written off. But with DMP, you may find yourself paying debts for more than ten years and still having something left to pay.

3. The type of creditor you’re dealing with

Creditors differ in their understanding and cooperation with debtors. Some creditors relate with debtors well, while some send threats upon threats, making life difficult for debtors.

With an IVA, creditors are legally prohibited from contacting you directly, so an IVA can be a better way to handle debts owed to creditors who may threaten you. If you’re on a DMP with such creditors, they may continue reaching out to you, especially when you miss a payment.

4. Your income

If your income has increased significantly, your IVA payments will also increase, and you may end up paying more in the long run. When this happens, you may consider switching to a DMP and settling your debts in full, as this will be a cheaper option.

It saves you money on IVA payments, and you can start rebuilding your credit score almost immediately.

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Is switching From an IVA to a Debt Management Plan a good idea?

IVA and DMP have advantages and disadvantages, which is why we recommend that you seek debt advice before starting with any debt solution.

Your financial situation may change during an IVA, and you may feel you should switch to a DMP. You want to ensure you seek debt guidance from experts alongside the information you have gathered here.

That said, an IVA may be right for you if you:

· Think you can’t repay your debt in full and want it written off after five years

· Are afraid of being harassed by creditors as IVA offers protection for debtors.

· You have a significant debt amount – like £6,000 or more

· You have enough extra income to cater to debt repayment services

On the other hand, you may consider a DMP if:

· You think you can pay your debts in full if given enough time

· You’re not worried about harassment from creditors, or you have no problem with being contacted

· Your disposable income is steady and can be used for debt repayments

· Your debts total less than £6,000

What are the downsides of changing to a Debt Management Plan?

· If you owe a significant amount, you may end up dealing with debts for a much longer period.

· Creditors can cancel your DMP at any time since there’s no legal protection for you.

· Creditors can keep contacting you and may even harass you sometimes

· DMP does not freeze the interest and charges on your debt.

· It doesn’t write off debts, even if you’ve never missed payments for more than ten years.

· Creditors can still take legal action against you if you fail to comply with the agreement.

What are the benefits of changing to a Debt Management Plan?

· You can set up a DMP yourself, saving you the cost of involving an Insolvency Practitioner in your repayment.

· You can negotiate a suitable repayment plan that fits your situation

· If you hire a credit counselling agency, you only need to make one payment, unlike IVAs, where you make monthly payments.

· You can settle your creditors once if your financial situation has improved, saving you monthly IVA payments.

Thousands have already tackled their debt

Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.

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How do I qualify for a Debt Management Plan?

Since a DMP is an informal arrangement, you only need to get your creditors to agree to set up a DMP. You can choose a DMP provider to get started or set it up yourself.

FAQ

Will creditors contact me during a Debt Management Plan?

Possibly. There’s no legal restriction on creditors if you switch to a DMP. Thus, they may still contact you if they need to. But in an IVA, creditors can only contact the Insolvency Practitioner (IP) handling the debt due to the legal protection.