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IVA or Debt Management Plan - Which Is the Best Debt Solution?

October 19, 2011 | Comments: 0 | Views: 158

We ask whether the IVA debt solution or a debt management plan is a better option to choose if you are looking for debt management solution. If you are trying to decide how best to solve a debt problem, the two solutions you are likely to consider are individual voluntary arrangements (IVA) and debt management plans (DMP). The two solutions are different and have very different implications for you and any assets that you have. Because of this whether you chose an IVA debt solution or a DMP will largely depend on your personal circumstances and your attitude to repaying debt.

How quickly do you want to be debt free?

The fundamental idea behind a DMP is that you will still repay all of your debt. However your payments are reduced to fit within a budget that you can afford. This means that using a DMP will considerably increase the length of time it takes to repay your debt. Despite this if you are eager to try and repay everything that you have borrowed a debt management plan will allow you to do so.

On the other hand, the IVA debt solution only lasts for a fixed period of 5 years. You pay what you can afford for 5 years and after that any unpaid IVA debts are written off leaving you debt free.Doing an IVA and getting IVA help is therefore probably more appropriate for you if you want to try and become debt free as soon as possible.

How much do you owe?

You can use a debt management plan for any amount of debt. So whatever the size of your debt you can always start a DMP. However you must always compare the amount of debt you owe to the amount you can afford to repay each month. Bear in mind that using a DMP you will have to repay everything that you owe. So if your debt is large compared to the amount you can pay it is likely to take a very long time to repay everything in a DMP. An IVA debt solution is generally appropriate if you have debts of more than £15,000. Even if your debt is very large compared to the amount you can repay, individual voluntary arrangements will still only last for 5 years as unpaid IVA debts are written off.

Who do you owe?

DMP and IVA debt solutions can only be used to deal with unsecured debts. Unsecured debts are things like credit cards, bank loans overdrafts and payday loans. If you are having difficulty with secured debts such as your mortgage or car HP, you cannot use an IVA or DMP to directly reduce these debts. There are also certain unsecured debts which cannot be included in DMP. If you owe money to HMRC (Inland Revenue) or you have business debts because you are a sole trader you will not be able to use a debt management plan to resolve these problems. However you can include these types of debts in an IVA debt solution. Getting IVA help would therefore be better if you owe money to HMRC as HMRC can be included as part of your IVA debts.

Are you a home owner?

It is important to consider the differences between debt management plans and individual voluntary arrangements if you are a home owner. As a home owner if you use a debt management plan you will not have to release equity from your property to help repay your debt if you do not want to.

However, if you use an IVA debt solution, you must be prepared to agree to releasing equity from your property to help increase the return that your creditors get. If you do not want to touch the equity in your home, you may therefore be more interested in a DMP

Weigh up all the options

When deciding how best to solve your debt problem you should consider both debt management plans and individual voluntary arrangements. Having said that, generally speaking if you have smaller debts which you are happy to repay in full or if you are a home owner and you do not want to release equity you might favour a DMP.

On the other hand if you have larger debts that will take many years to repay using a debt management plan or if you owe money to HMRC this can be included as part of your IVA debts and so an IVA debt solution may be better suited to your needs. Ultimately however before you make your decision about which solution to use you must always take advice from a debt specialist you can explain the options and what they will mean for you.

Both IVAs and DMPs have specific advantages and disadvantages which will become more or less important depending on your particular circumstances.

What to do next

If you are struggling with debt and are considering an IVA, visit Our experts are available to speak to you about the IVA problem and offer further help and advice. Our vibrant debt forum gives free access to experienced industry experts and others who have suffered with debt problems and have been through the IVA process themselves. Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.

James Falla is a debt adviser from in the UK. For more quality and unbiased information on Debt Management Plans, visit our website at

Source: EzineArticles
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