Difference between DMP and IVA?

alibab85

Hi,

I am new here. I was wondering if someone could explain to me if there is a difference between a debt management plan and an IVA, or they the same thing?

Thanks

Deep_In_Debt

For a start, an IVA is legally binding on both parties; a dmp is not, therefore creditors don't have to freeze interest whilst on a dmp.

Generally, an IVA will last 5 or 6 years; a dmp will take as long as it takes to pay the whole debt off.

I think with an IVA you need a surplus of about £150pm minimum and anything extra you earn/inherit etc will need to go into the IVA.

If an IVA fails, it can result in BR. A dmp is a little more flexible in this respect.

Others will be along with more...just a brief outline!

I do suggest you look throughly into all options.

Tixy

An IVA is a form of insolvency and is much more formal, its legally binding - you need to appoint an insolvency practitioner who arranges a creditor meeting where the majority of your creditos must agree to your proposed IVA repayments.
An IVA usually last 5years and after that time you will be required to release any equity from your house (if you are able to). If you cannot it is usually then extended to 6years of repayments.
With an IVA you need to have a reasonable amount of income available for your debt repayments and need to have a stable income/job to maximise your chance of IVA running to full term. There is less flexibility if you lose your income. An IVA usually costs £1000s in fees. As it is a form on insolvency whilst it might clear from your credit report there are certain circumstances where you would have to declare it for the rest of your life (like you do for bankruptcy). It usually excludes you from working in the finance industry banks accountants etc
Have a read of this about IVAs http://www.moneysavingexpert.com/loans/pdf-iva-guide.pdf Usually as a guide you would need to be in debt or around £15k or more.

A debt management plan is an informal agreement with your creditors administered by a third party (preferably a charity who will not charge you). On a DMP you work out how much you can afford to repay and this is split between your creditors. If your circumstances change it is usually easy to vary a DMP than an IVA.
Your creditors don't have to freeze interest although it is quite common for them to agree to do so.
As it is informal then it is still possible that your creditors could take you to court (although providing you respond to a court claim you would usually stilll be able to pay in similar installments to what you pay under your DMP). It is not particularly common to be taken to court (unless your creditor thinks you can afford to pay more than you are or have excessive assets).

I think national debtline also has some useful info.

If you are considering either speak to one of the debt charities for advice.

Edit - this might be useful - http://www.nationaldebtline.co.uk/england_wales/page.php?page=35_options_for_paying_back_your_debts#3

Deep_In_Debt

Much better advice from Tixy!

My advice was in a "nutshell"