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Choosing a debt solution is not to be taken lightly. It is important to know as much as possible about your options before reaching a final decision. One common source of uncertainty, among people searching for a debt solution, is whether to choose a formal, legally-binding solution such as an IVA, or a non-formal one like a DMP.

Both have advantages and disadvantages, but which is best for you will ultimately depend on your individual circumstances. Below we explore a few of the key issues you should consider when choosing between these two debt solutions.

What do IVA and DMP stand for?

IVA stands for Individual Voluntary Arrangement, and DMP stands for Debt Management Plan. Both are solutions for people who are struggling with unmanageable debt, and both involve making reduced monthly payments as part of an altered repayment plan agreed between you and your creditors.

The main difference between the two solutions, as mentioned above, is that one is legally-binding, and the other is not. In practice, this means that, with an IVA, once your creditors have agreed to its terms, they are entirely bound by them. They will not be able to take legal action against you – either by petitioning to make you bankrupt, or taking other court action. They will also be unable to further communicate with you, but must instead contact the licensed Insolvency Practitioner (IP) who is dealing with your case. This can remove a huge source of stress for people struggling with debt, since hassling letters and phone-calls are some of the most frequently-cited triggers for poor mental health among people with problem debt. IVAs also allow you to write off some of your debt, unlike DMPs.

DMPs are not legally binding. This means that your creditors can still take action against you should you default on your revised payment plan. They are also still free to contact you. Despite this, there are reasons why a DMP might can still be a better solution in certain circumstances.


The eligibility criteria for entering into an IVA are stricter than for a DMP. You must:

  • Have at least £6,000 of unsecured debt
  • Owe money to two or more creditors
  • Live in England or Wales (Scottish residents could consider a Trust Deed, which is a similarly structured solution)
  • Be able to afford monthly payments, usually of at least £80

For a DMP, on the other hand, there are no set rules for who can use one. Anyone who is struggling with their current debt obligations, but could afford reduced monthly payments and has no trouble paying priority bills (such as mortgage, rent, or council tax) is able to propose a DMP to their creditors. If you do not have enough debt to be eligible for an IVA, a DMP could be a good option.


To set up an IVA, you must speak to a licensed IP. They negotiate with creditors on your behalf, and establish and administer your repayment plan. This incurs fees. However, these fees are always included in your monthly payments, which are themselves based only on what you can afford. This means that what you pay is not based at all on IP’s fees.

Establishing a DMP is slightly different – there are three options. You could negotiate with your creditors and set up the DMP yourself, which some people do feel comfortable with, or you could get help from a private company or charity. Debt charities will negotiate with creditors on your behalf and establish a DMP free of charge, but you might choose to use a private firm, whose fees will vary. Fees are usually around 15% of your monthly payments.

Interest and Fees on your Debt

One benefit of an IVA is that as soon as it is established, all fees and interest payments on your debts are frozen. You simply pay your monthly instalments for a fixed number of months, and at the end of the plan, any remaining debt is written off.

With a DMP, your creditors might also agree to freeze interest and fees, but this is at their discretion. Additionally, you will pay off the entire balance of your debt with a DMP, meaning they can take much longer than an IVA in some cases.


If you are a homeowner, your IVA agreement might require you to release equity from or remortgage your property towards the end of the scheme. If you do not own property, you will likely have to make an extra year of payments in lei of releasing this equity.

Entering into a DMP does not come with this stipulation, which is why some homeowners might choose one over an IVA – especially if they are close to paying off their mortgage.

Credit Rating

Since an IVA is entered onto a public record, potential lenders will be able to see it, which could dissuade them from offering you credit. An IVA will stay on your credit file for six years. However, since IVAs allow you to write off unaffordable debt, in the long-term it will be easier to rebuild your credit than it would be if you had not taken action to deal with your debts. During an IVA, your access to further credit is also limited.

Using a DMP is likely to have a positive effect on your credit score, since it demonstrates that you are taking action to deal with your debt, and plan to pay it back in full.

There is no single ‘right’ answer when it comes to choosing a debt solution – for further advice, you could speak to a friendly Creditfix advisor on 0808 2085 198.

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