GuidesUnderstanding DebtIVA vs Debt Management Plan: what is the difference?
Understanding Debt·6 min read

IVA vs Debt Management Plan: what is the difference?

IVAs and Debt Management Plans are two different approaches to unaffordable debt. Here is what each means and how they compare.

This guide provides general educational information only. It is not regulated financial, debt, tax or benefits advice. Always verify important details and, where appropriate, seek advice from a qualified professional or free advice service.
Important: This is general educational information only — not debt or legal advice. If you are struggling to meet debt repayments, contact a free regulated debt advice service immediately: StepChange (0800 138 1111), National Debtline (0808 808 4000), Citizens Advice (0800 144 8848). These services are free. Some commercial IVA companies charge fees — free advice services will not charge you.

When debts become unmanageable, there are formal solutions available in the UK. Two of the most common are Individual Voluntary Arrangements (IVAs) and Debt Management Plans (DMPs). They are quite different — understanding the difference matters before making any decision.

What is a Debt Management Plan (DMP)?

A DMP is an informal agreement between you and your creditors, usually managed by a debt advice charity or fee-free service. You make one affordable monthly payment to the plan manager, who distributes it to your creditors. Interest and charges may be frozen by agreement. A DMP is flexible — you can change payments if your circumstances change, and you pay back the full amount owed (just at a slower rate).

What is an Individual Voluntary Arrangement (IVA)?

An IVA is a legally binding insolvency arrangement between you and your creditors, set up by a licensed Insolvency Practitioner. You make agreed monthly payments for a set period (usually five or six years). Any remaining debt at the end of the IVA is written off. It requires creditors holding 75% of the debt by value to agree. An IVA is recorded on the Insolvency Register and has serious effects on your credit file.

Key differences

  • Legal status: a DMP is informal; an IVA is a formal, legally binding insolvency procedure
  • Debt write-off: with a DMP you repay everything (possibly without interest); with an IVA, remaining debt after the term is written off
  • Cost: free debt charities offer DMPs at no cost; IVAs involve fees paid to an Insolvency Practitioner, usually taken from your monthly payments
  • Credit impact: both affect your credit file, but an IVA also appears on the public Insolvency Register
  • Flexibility: DMPs can be adjusted; IVAs are harder to change once agreed
  • Asset impact: IVAs may require you to release equity in your home in the final year — DMPs generally do not

Which is right for you?

Only a qualified debt adviser can help you work out which solution — if either — is appropriate for your specific situation. Bankruptcy is another option not covered here. Free debt advice services will not push you towards any particular solution. Some commercial IVA companies may. Always start with a free service.

General educational information only — not debt or legal advice. Insolvency is a serious step with long-term consequences. Contact StepChange, National Debtline or Citizens Advice for free regulated advice.

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