iva /dmp - what's the difference?

Just_Peachy

I have completed CCCS debt remedy online and they have recommened a DMP for me, can somebody explain the difference between a DMP and an IVA? they sound very similar to me (sorry if i am being stupid)

thanks.

Charco_2

You could almost think of an IVA as a mid-point between a DMP and Bankruptcy. There are various pros and cons to each.

A DMP offers you a chance to get some respite from your creditors while a professional company (and be careful to find a good one - this industry is not regulated so there are many cowboys too) deals with your finances, creditors and phonecalls. It is an INFORMAL arrangement and relies on the co-operation of your creditors which they can refuse. If this is a route you intend to go down, be sure to keep on top of your accounts to make sure that interest and charges are frozen because if they are not you may as well be p!55!ng into the wind! (Pardon me :A). Also because it is an INFORMAL arrangement your creditors or you can change your mind at any time... you creditors may get bored and decide to pursue you again. It depends on the amount of debt and and disposable income whether this is the right solution for you - some people use DMPs just to get the creditors off their backs for a while (statistically speaking DMPs run for 18months before people get bored and revert to bad habits) and a DMP does offer some respite from all the phonecalls and letters however it's up to you whether you see it as a long term solution to your debt problem... it could end up a Loooooooooong term solution!

An IVA is different but it's no picnic either. It is a FORMAL agreement between you and your creditors whereby you agree to pay your surplus/disposable income into a fund (run by a qualified IP), who then disperses the money to your creditors - much like a DMP! In both solutions you are expected to pay as much as you can afford to, after you have taken care of all the household expenses (like mortgage/rent, heat/light, food, council tax, tv...) However an IVA will typically only run for 5 years (sometimes 6) and the remainder of the debt is legally written off (in a DMP you keep paying until the balances are zero).

Sorry this is such a lengthy post and it may not even have answered your question!

Nick700

Good afternoon,

An IVA is a legally binding arrangement, normally for someone who owes more than £15,000, and who will take a significant amount of time(7 years +) to repay their debts based on what they can afford each month. Normally, you will pay a set sum every month for 5 years in the IVA, and at the end of this time, all your unsecured debts will be written off. In order to set up an IVA, you need the services of a licensed Insolvency Practitioner(such as CCCS), who will administer your IVA for you. While you are in an IVA, interest and charges on your debts are frozen, and creditors cannot contact you asking for payment, as the monthly payment into your IVA covers all your unsecured creditors. As it is a legal arrangement, 75% in value of your creditors who vote on your IVA must accept your IVA, in order for it to become legally binding. You can only do an IVA if you live in England, Wales or Northern Ireland.

A DMP is not a legally binding arrangement, and is most suitable when you can afford to pay your debts off in a reasonable length of time, as there is no debt write off unlike in an IVA. Creditors do not have have to stop taking legal action or freeze interest and charges, however CCCS has a good track record of this. A DMP does not involve any assets, however in an IVA, you will be expected to release any significant assets, such as your home(if you have equity) by way of re-mortgage during the IVA.

I hope that's helpful, but suggest you speak to CCCS and they will answer any questions you have and explain the reasons for their recommendation.

If you have any further questions, just post on here and we will be only too happy to help.

Nick