Debt Management Plan & Individual Voluntary Arrangements

daig

Hi Everyone this is my first post,

Please can someone explain the difference between a DMP and an IVA?
thank you
DAIG

CLAPTON

the devils in the detail but broadly the chief difference is that an IVA is a formal (i.e. court backed ) agreement between you and your creditors supervised by a Insolvency Practitioner(IP). Once agreed (75% of your crditors need to vote in favour ) the agreement is binding on them all. Equally you must abind by the terms (usually between 3-5 years) and if you dont you are liable to be made bankrupt.
A DMP is not binding and so a creditor could choose to withdraw if they want to.

If you look at the Payplan and CCCS website you will find useful information

daig

a thank you to Clapton for your help, I will be looking into the sites you refer to, thanks again daig

fairynuff_3

Hi Daig,
I would certainly recommend going for an IVA. I did alot of research before applying for mine and the main reason I went for it is that with an IVA there is no more interest accruing on your debts. They draw a line in the sand with an IVA, but with a DMP the companies can continue to add interest to your debt and the company that runs your DMP charges as well. I used PayPlan. I have the security of knowing that my £47k debt is now £12k with £7k in charges/fees (that is included in my repayment plan). Whilst £7k charges is a hard swallow I know that it is fixed and I am legally protected from my creditors.
Hope this helps, good luck!

daig

Hi Fairynuff, thanks for your info.

In v limited research that I've done into this, so far - it was suggested that IVA's tend to be more readily available to people with mortgages/equity, is this your experience? With an IVA what control do you have over any assets (limited in my case) that you have and how are fees assessed? Finally I understand that with a DMP one doesnt necessarily get a bad credit rating whereas with IVA you do? Thanks again

fairynuff_3

Hi Daig,

My debts were all unsecured. I was doing some self-employed work (eBay etc) as well as my full time job and I had some stock and a good PC (about £3k worth spent by me but I guess resale value was way less) and when I spoke to my insolvency practitioner about it they said that there was so little value in repossessing these items that they didn't touch them.

You have no control over the fees, I didn't realise they were going to be as much as they are but hey, £19k for a £47k debt, you can't really complain!! They break down like this: £2,500 to the nominee, £3,750 to the supervisor, £350 VAT on the fees and £130 out of pocket expenses (which I guess is them coming to visit me in my home to interview me and the room in London where I had to go for the meeting).

I wouldn't necessarily believe what they say about DMP's not giving you a bad credit rating although I don't know whether it's true. These companies want you to take one of their DMPs so they are going to try to make it sound good because they make so much money off you (and it doesn't keep your creditors at bay). You are only going to be in IVA for 5 years, with a DMP it could be much longer than this if you are going to have to live off a budget anyway.

It is worth noting that if you are in a job where you expect your income to go meteoric over the next 5 years e.g. you are on £20k now and you expect to be earning £60k in a few years time, then your IVA repayments will be adjusted annually accordingly. However, I would say that the plus side of this is that you have still got court protection from creditors and you don't pay any ongoing interest and the term is only 5 years.

I would be interested to know where you got the 3 year timescale from as I never heard about this.

The only difference between an IVA and bankruptcy in my case is that I can't do the job I want to do if I go bankrupt. If you are not pursuing a career in law, accountancy or banking then you may want to consider going bankrupt if your debt is high enough. Seriously, the credit rating issue is not much worse for bankruptcy than it is for IVA in terms of getting mortgages from my research, it is just the job that is the problem.

Chortle_2

I've never had either a DMP or an IVA, so I don't really feel qualified to advise, but I would point out that NOT ALL DMP's charge!! Both CCCS and Payplan (links at top of the page) are charities, who do not take a penny of your money to administer your DMP.

Personally, I would steer as clear of an IVA as physically possible, they are too close to bancruptcy for my own personal liking, and the fees are huge from what I can work out! Plus, if you default, bang, immediate bancruptcy - not a good idea if you own your own home or other assets you don't want to lose. I would talk to CCCS/Payplan about your options, as I'd have thought that a DMP would be better in your circumstances If not though, they'd be able to tell you that, and recommend an IVA.

Benji

daig wrote:

I understand that with a DMP one doesnt necessarily get a bad credit rating whereas with IVA you do? Thanks again

Hi Daig, I'm on a DMP at present, and by looking at my credit file I can tell you this...

IF your creditors agree to lower payments then you're okay from when they agree - but until then you will get 'black marks' on your credit record.

If you use a fee-charging company, they will take the 1st payment for themselves - hence you're already 1 month behind before you start.

I was told by a mortgage consultant that a 2 or 3 month period of trouble - providing you've been fine before - doesn't have much effect on your creditworthyness.

Tr@cker

Benji, ive avoided the DMP up to now but its a close call. Can you give me some idea by how much you got your payments reduced and did you arrange it through the CCCS ?
If push came to shove im not actually that bothered by my credit rating-if you cant get credit you cant get (further) debts!