Differences between an IVA and DMP

This articlecomprises of the informationrelatedto your debt advice, that how should you manage it and what’s the best option to choose in case you are facing difficulties in managing your debts. We would take into account the two major debt managing sources available for individual’s i.e. Individual voluntary agreement (IVA) and Debt management plan (DMP), we need to understand the differences between them in order to choose the best option for our debt management butat first place we need to understand the terms.

Firstly, An Individual Voluntary Arrangement (IVA) is an agreement between you and your creditors for paying all or a part of debts that you owe. An agreement of regular payment is made on your behalf to an insolvency practitioner, who will divide this money between you and your creditors.

Whereas, a debt management plan (DMP) is again a formal agreement between a debtor and a creditor for addressing the terms of the outstanding debt. It usually refers to a personal finance procedure for individual addressing higher consumer debt.

You need to choose which one is right for you by understanding the differences between the two and your circumstances. Plus there are a lot of misunderstandingsabout IVAs. Individualsusually think that they are on an IVA, when in reality they are not.

Again you should not trust all the material available about IVAs around the web because everything isn’t true and you need to put these untruths to rest. Now we are putting together a thorough guide for your help to understand the very basic and obvious differences between an IVA and a debt management plan.

IVA and DMP; 12 Differences

  1. An Individual voluntary agreement is a formal agreement between you and your creditors whereas a Debt management plan is an informal agreement.
  2. An IVA is less flexible agreement as compared to that of a DMP. You can vary you payments on an IVA but only up to 15% other than that your request is forwarded to your creditors and they vote and make a decision for you. Whereas in DMP you can make changes within you payments whenever necessary.
  3. An IVA has a rule that it will stop all the interests and other charges. On the other hand in a DMP there is no such guarantee that this will happen.
  4. An IVA is guaranteed and do have an end date. Whereas, there is no guaranteed or end date for a DMP.
  5. In an IVA fees are involved and if you are going for a DMP with a free debt than there aren’t any fees for administration involved.
  6. In a DMP you can choose a third party to deal with its administration or you yourself can do it but in an IVA you need to use a insolvency practitioner which should be licensed.
  7. If you go on boardwith an IVA your IP will check your financial settings. But a DMP provider would only inquire for the proof of your salary and your debts usually.
  8. In a DMP there is usually no amount of minimum debt but it would depend on your DMP provider and the conditions of yours. But in an IVA the lower limit is around £15k.
  9. 75% Creditors in an IVA agreement needs to agree on your proposal where as in DMP they don’t need to accept you agreement.
  10.  All creditorswill stop contacting you once it goes ahead. However in a DMP creditors can continue to hunt for you for any kind of extra payments and can follow the usualstandard debt collection procedure which can be stressful.
  11. Every IVA has public information and this information is entered on to the insolvency register. There is no corresponding for DMPs.
  12. You repay your debts in full in a DMP whereas in an IVA a certain percentage of your debt if written off.

Now, we have clarified the striking differences and pointed out how different IVAs are from DMPs in true sense. No doubt, both have their own advantages and disadvantages and only you can decide the best solution for yourself according to your situation.