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What’s the difference between an IVA and a DMP?

Posted 18 December 2015

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If you want to know the differences between an IVA and a DMP, read on.

Deciding which debt solution best fits your needs can be tricky and depends on so many different things. With this in mind, it’s helpful to remember that there’s no magic bullet for debt and there isn’t a single solution that can be called the ‘best’ – it all depends on your personal circumstances. Two common debt solutions are IVAs (Individual Voluntary Arrangements) and DMPs (Debt Management Plans), but what’s the difference between them? 


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In this blog, we’ll show you what the main differences are between a DMP and an IVA, so you can better understand the choices you have for resolving problem debts. If you want to learn all the differences between the two, we’d advise that you look at our pages on each: DMP and IVA.

Just a quick note before we go on – IVAs are only available to residents of England and Wales. If you live in Scotland, you can see the solutions available to you here.  

1. DMPs are informal agreements that are made between you, or someone working on your behalf, and your lender. They are not legally binding and your lenders are not obliged to accept it, or anything else you ask them to do – like stopping the addition of further charges and interest. So they may agree to the DMP, but continue to add charges and interest until the debt is paid - although we should point out that in most cases they will reduce or freeze interest, as they want to help you to become debt free and are happy that you are contacting them and trying to agree a repayment plan. 


On the other hand, an IVA is a formal agreement, in fact, it’s a form of insolvency, and is legally binding on your lenders. Once the IVA is in place, your lenders are prevented from contacting you further, nor can they add any further interest and charges to your account.


2. A DMP is much more flexible than an IVA. Once the payments for your IVA has been agreed, based on your disposable income, once all your priority and essentials  bills have been paid, there is limited flexibility – your payments can be moved down (or up) by just 15%. If you need to ask for a bigger reduction (or increase) than this, then your Insolvency Practitioner has to go back to the lenders included in your IVA and ask them to vote on the change to approve it. You can also ask for the payments to stop for a period of up to six months – known as a payment break – this will usually just extend the term of your IVA by the same amount.  

On a DMP changing your payments is more straightforward. You simply need to update your income and expenditure details and send them to your debt management provider (or your lenders if you have set up your own DMP). You should detail why you need to change the payment, maybe you’ve changed jobs or your rent has gone up for example. The lenders can either say yes or no, but they’re more likely to say yes to a payment change if they can see that you are still paying all you can afford .  However, there isn’t unlimited flexibility with payments, your lenders will still want to know that your budget is  reasonable and that you are paying as much as you are able towards your DMP. 

3. If you enter into an IVA, your name will appear on a register that any member of the public can search. So there is the possibility of people knowing you are on a formal debt solution and have been declared insolvent. However, there are some situations – for example, if you feel you and your family’s safety may be at risk, when you can request your details be left off the register .  


There’s no such register for DMPs because they are not a form of insolvency. So the only people who’d know you were on a DMP would be people that you tell. 


4. A DMP does not have a definite end date, it can go on for as long as is required to repay your debts as long as the payments are at an affordable and sustainable level for you. 

However, an IVA will have a definite end date. It usually lasts for five years, sometimes six. Once you get to the end of your IVA any debt that was included in it that is remaining will be written off and you will no longer be liable for it. 

These are some of the main differences between DMPs and IVAs but, as we said, this is only an overview of the major ones. To get more details of both debt solutions, read our more detailed guides or use the ‘contact us’ buttons on the left of the page to speak to one of our trained debt advisors about the best solution for you.  


by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.