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Which is better for managing debt in the UK – IVA or DMP?

When you’re facing unmanageable debt, understanding your options can help you to start taking back control. Two of the most well-known debt solutions available in the UK are Individual Voluntary Arrangements (IVAs) and Debt Management Plans (DMPs). But with both aiming to help you repay what you owe in a more manageable way, how do you know which is right for you?

In this guide, we’ll explain the IVA vs DMP differences, look at how each solution works, who they’re suitable for, and what the long-term impacts might be. That way, you can choose the option that works best for you.

What is a Debt Management Plan (DMP)?

A DMP is an informal agreement between you and your creditors. With the help of a third-party provider, your unsecured debts included in the DMP are consolidated into one monthly payment based on what you can afford. The provider then distributes this payment to your creditors.

DMPs are flexible, which means they can be adjusted if your circumstances change. However, because they’re not legally binding, your creditors don’t have to agree to the terms and can still take legal action.

What is an Individual Voluntary Arrangement (IVA)?

An IVA is a formal, legally binding agreement between you and your creditors, arranged through a licensed insolvency practitioner. You agree to pay back a set amount each month over a set period of time (typically 5 or 6 years), and any remaining unsecured debt included in the IVA may be written off at the end of the term.

Unlike a DMP, once an IVA is in place, your creditors cannot take further legal action or contact you directly. With a DMP, creditors are unlikely to take action as long as you keep up your repayments, but they still have the option to do so.

There are advantages and disadvantages of IVAs so it’s important to do your own research before you make a decision.

IVA vs DMP difference: Key points to compare

Here’s a quick comparison of the key differences between these two debt solutions:

Legal status: An IVA is legally binding. A DMP is informal.
Debt write-off: IVAs may include a debt write-off at the end. DMPs require all debts to be repaid in full unless a settlement is negotiated.
Protection from creditors: Creditors must stop action during an IVA. In a DMP, they can still contact you or take action.
Impact on assets: An IVA may require you to release equity from your home or declare savings. A DMP typically doesn’t.
Credit rating: Both will impact your credit score, but IVAs appear on the public Individual Insolvency Register, which is a searchable online database that shows details of people using formal insolvency solutions like IVAs or bankruptcy.

Who can get a DMP?

A DMP may be suitable if:

You have at least £2,000 in unsecured debt
You have more than one unsecured debt
You have at least £100 in disposable income each month
You can make regular payments but not the full amount creditors expect
You want a flexible solution that adjusts with your income
You don’t need legal protection from creditors.

DMPs can help you avoid missing payments, prevent debt from growing further, and give you time to get back on track. However, they usually take longer than other options because you need to repay the full debt and the provider will usually apply charges, even if your creditors agree to freeze interest.

Who is eligible for an IVA?

An IVA may be more suitable if:

You are at least £6,000 in debt
You have at least £80 in spare income each month
You owe money to two or more creditors
You have a regular income and can make consistent payments
You need legal protection from creditors.

Because IVAs are formal agreements, you must work with an insolvency practitioner. Once agreed, creditors can’t chase you or add more interest and charges. If you keep up with your payments, some of your debt may be written off at the end of the term.

Is an IVA better than DMP in the UK?

There’s no one-size-fits-all answer. Whether an IVA or DMP is better for you depends on your circumstances, how much you owe, your income stability, and whether you need legal protection.

An IVA could be better if you:

Need to protect your home from legal action
Want a fixed time frame with potential debt write-off
Can commit to fixed monthly payments over five or six years.

A DMP might be the better choice if you:

Want a more flexible plan
Don’t meet the minimum debt or income requirements for an IVA
Prefer an informal arrangement without legal obligations.

Both options can help you repay debt in a way that suits your situation, but understanding the differences is key to choosing well.

Long-term impact of an IVA vs DMP

It’s important to think ahead when choosing a debt solution. While both IVAs and DMPs will affect your credit score, they have different long-term consequences.

With a DMP:

Your credit file may show late or missed payments
The plan doesn’t appear on the public insolvency register
Creditors may still mark defaults
Credit rebuilding can start sooner after completion.

With an IVA:

It stays on your credit file for six years from the start
Your name appears on the Individual Insolvency Register
Some employers may check this for financial roles
You might find it harder to get credit during and immediately after the IVA.

If your debts are already affecting your credit score, entering into a debt solution – whether an IVA or DMP – can be the first step towards rebuilding it over time.

Getting expert help

If you need help choosing a debt solution, you can visit MoneyHelper for free, impartial advice.

Alternatively, you can get in touch with MoneyPlus. We understand how difficult it can be to manage debt, especially when you’re unsure where to start. We’ll take the time to understand your full financial picture and help you explore all your options, including DMPs and IVAs.

We’re authorised and regulated by the Financial Conduct Authority (FCA) and have over 25 years’ experience in helping people manage their debts with confidence.

Want to find out which solution could suit your situation? Contact a MoneyPlus adviser for information and advice.