Debt Management Plan or an IVA? How do the two types of Debt Solution compare? The aim of this article is to lay out in front of you the differences between a Debt Management Plan and an IVA or Individual Voluntary Arrangement.
Which of the two debt solutions is best for you depends on your own personal circumstances so it is worth getting expert Debt Advice once you have finished reading.
Debt Management Plan compared to an IVA
In the table below you can find comparisons between these two debt solutions. This should then give you a better overview of how these two debt solutions compare.
|Debt Management Plan||Individual Voluntary Arrangement|
|You will pay off all of your debt.||With a Debt Management Plan you will pay off everything you owe which means you could be in debt for a very long time.||With an IVA a percentage of your debt is written off at the end of the arrangement. In most cases an IVA lasts for five years.|
|Creditors will still contact you.||A Debt Management Plan is not legally binding so your creditors can still contact you and take further action against you if they wish to do so.||As an IVA is a legally binding agreement between you and your creditors|
|Information will be recorded on the Insolvency Register.||As your Debt Management Plan is not formal form of insolvency no record of your Debt Management Plan is recorded anywhere.||Your details will be registered on the Insolvency Register.|
|You can set up the arrangement yourself.||You can set up your own Debt Management Plan if you wish to do so. There is nothing to stop you doing this.||You must use a licensed Insolvency Practitioner in order to set up an IVA.|
|You have an exact date telling you when you will be debt free.||With a Debt Management Plan you might not know exactly when you will be debt free. Especially if additional interest and charges are still being added to your outstanding balance.||In most cases your IVA will end after five years. Sometimes this period could be six years. This would normally be the case if you have re-mortgaged your home.|
|You can make big changes to your monthly payment amount.||With a Debt Management Plan you can make changes to your payment whenever the need arises so long as the change is reasonable.||You can make changes to your payment up to around 15% of the agreed repayment amount. Changes greater than that amount require the approval of your creditors.|
|There is a minimum amount of debt required.||With a Debt Management Plan there isn't a minimum amount of debt before you can set one up.||With an IVA you would normally have around 15k of debt to qualify.|
|Your finances will be checked.||To set up a Debt Management Plan you normally only provide proof of income||When setting up an IVA the Insolvency Practitioner will go through all your finances and check your financial circumstances.|
|Interest and Charges will be frozen||Because a Debt Management Plan isn't legally binding you may find some of your creditors still charge interest and charges.||Once your IVA is set up no further interest or charges will be applied to the outstanding amount.|
Ready to find our more about a Debt Management Plan or IVA?
Now you have seen a comparison of the two debt solutions why not visit our Debt Advice Page? On there you can find out information about the various debt help organisations, and get expert debt advice for your own situation.