An IVA or a Debt Management Plan, which one is better?
Well honestly that depends on your own personal circumstances. In this post I look at some of the differences between the two debt solutions and provide links to further information, should you wish to find out more.
The Differences between an IVA and a Debt Management Plan
– When you set up a Debt Management Plan, your creditors are under no obligation to accept the repayment plan you propose. This means a Creditor could take further action against you. With an IVA only 75% of your creditors need to agree to your IVA for it to go ahead.
– When you enter an IVA, the information is recorded on the Insolvency Register. There is currently no central record for a Debt Management Plan.
– An IVA is a form of insolvency. A percentage of your debt is written off. With a Debt Management Plan you will repay the debt in full.
– Once your IVA is set up, Creditors will stop contacting you. With a Debt Management Plan creditors are free to continue contacting you to make demands for payment and to ask for your payments to be increased.
– You can set up your own Debt Management Plan if you wish too. You can also get free Debt Management Plans from several organisations. With an IVA you are required to use a licensed Insolvency Practitioner.
– If you set up your own Debt Management Plan, there are no costs involved. An IVA involves fees that you must pay.
– Entering an IVA will stop any further Interest or Charges. With a Debt Management Plan, because it is an informal agreement you may still incur charges and interest.
– An IVA has a set end date. Typically this is after five years. Your IVA could continue for an additional year after this, for example if you had to remortgage your home. With a Debt Management Plan if interest and charges continue to be added on, it can be hard to know when you will have finished repaying. In some circumstances the interest could equal more than what you pay, meaning you may never pay off the debt.
– An IVA can be less flexible than a Debt Management Plan. It is possible to make changes to your IVA payment up to around 15% of the total payment. Larger changes will require the approval of your creditors. With a Debt Management Plan you can typically change your payments with ease, as long as the change is reasonable.
– Typically there isn’t a minimum amount to enter into a Debt Management Plan. An IVA on the other hand requires you to have around Â£15k or more debt.
– When entering into an IVA, the Insolvency Practitioner will go through and check your financial circumstances. With a Debt Management Plan you typically just create an Income and Expenditure form and that’s it.
– A Debt Management Plan is an informal solution whereas an IVA is a formal solution. This means that under a Debt Management Plan, a creditor can still take further action to recover the money owed. Once an IVA is set up a creditor is unable to take any further action against you.
Finding out More about IVA’s and Debt Management Plans
Below are some links to help you find out more about IVA’s and Debt Management Plans. When making the decision between the two, it is important to assess the benefits of each solution. Getting professional advise is also important to enable you to make an informed choice.