IVA vs Debt Management Plan – Which Is Best?

An IVA (Individual Voluntary Arrangement) and a debt management plan (DMP) are two different ways of managing your debts. Under both you agree to make regular repayments to settle your debts.

They each have their advantages, but by the same token they each have their disadvantages. The IVA is the more severe option but clears your debts quicker.

Which of these two options is the best route for you to take will depend on your personal circumstances.


Both an IVA and a debt management plan are legal to set up, but the difference is the fact that an IVA is legally enforceable whereas a debt management plan is an informal arrangement.

What this means is that if you have an IVA both you and your lenders are legally required to adhere to it whereas if you have a debt management plan you and your lenders can choose to ignore if it you want. Under an IVA your lenders cannot chase you provided you are making the agreed payment each month. Under a debt management plan you have no such protection and your lenders can call upon you for increased payments whenever they choose.

Bear in mind that if you decide that a debt management plan is your best course of action and later decide that you would have been getter off going down the IVA route, because the debt management plan is an informal arrangement there is nothing to stop you changing your mind and switching to an IVA.


Debt management plans are available to anyone, but if you want to enter into an IVA there are certain criteria which much apply to you:

  • you owe at least £6,000
  • you owe two or more people or organisations
  • you can afford the monthly payments

You aren’t required to be a homeowner to qualify for an IVA, but if you don’t own your own home you have to pay an additional year’s worth of repayments.

There are no such rules for you to comply with if you want to set up a debt management plan. All you need to do is propose it to your lenders and hope that they agree to it.

How Long Do They Last?

An IVA usually lasts five years. At the end of that period you will usually be free of debt because any debt that you have not repaid is written off.

There is no set duration for a debt management plan. They tend to last around ten years but it will depend on the level of your debt and how much you can afford to repay each month because with a debt management plan you generally have to repay all of the money that you owe in full.

Another factor to consider is the fact that under a debt management plan your lenders can continue to charge interest on the amount that you owe whereas under an IVA the interest is frozen. This can mean that it takes longer to repay the debt under a debt management plan.

How Much Do They Cost?

You have to use a licensed insolvency practitioner if you want to set up an IVA and they will charge you fees. However, those fees are added to the money that you owe and as any outstanding debt is written off at the end of the five year term, in practice the fees are irrelevant.

You do not have to use a licensed insolvency practitioner to set up a debt management plan. You can set one up yourself or use a debt charity to help you. However, if you decide to use a debt management company to help you that company may charge a fee to set the plan up and to manage the monthly payments on your behalf.

Will I Lose My Home?

Under an IVA, if you have equity in your home you will have to release some of that equity in the final year. However, unlike bankruptcy, this does not mean that you will lose your home.

Under a Debt Management Plan there is no protection whatsoever because it is an informal arrangement. However, provided you keep up the monthly repayments it is unlikely that your lenders would attempt repossession.

Will I Lose My Car?

Unless you own a particularly valuable vehicle it is unlikely that you would have to give it up, either under an IVA or as part of a debt management plan.

However, if you own a particularly expensive vehicle it is quite likely that you would have to sell that vehicle and replace it with a less expensive model.

Similarly, if you are expecting your lenders to agree to a debt management plan they are unlikely to agree to it if you don’t also agree to reduce your expenditure as far as possible. If you have a car costs a lot of money to run you are more likely to get your lenders to agree to your plan if you agree tp replace that car with one that uses less fuel or is cheaper to insure.

Will I Lose My Job?

In general, neither an IVA nor a debt management plan will affect your job, although if you are working in certain senior positions or in a finance-related role it might be worth checking your employment contract to see whether there are any conditions that apply or speaking to your HR department to get their advice.

Will People Find Out?

Unlike bankruptcy where a notice will be posted in the London Gazette, other than your lenders nobody will be advised that you have an IVA or a debt management plan.

If you have an IVA, the Insolvency Service will register the fact that you are insolvent on the Insolvency Register. However, although anyone can look at the Insolvency Register they would need to suspect that you were insolvent first and then know where to look to confirm their suspicion.

As a debt management plan is an informal arrangement it is private between you and your lenders so unless you decide to disclose the fact that you have agreed to a debt management plan with your lenders nobody will know about it.


If you have relatively high levels of debt and no realistic chances of being able to pay back that debt within a reasonable period of time, the IVA could well be the best route to take.

If, however, you have lower levels of debt by are simply struggling because the monthly repayments are higher than you can afford, a debt management plan is something you should consider. The debt management plan will usually mean that it takes longer for you to become debt free, though, and you will end up repaying more money.

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