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Debt Management or IVA

Deciding what solution to go for is a serious business for the insolvent debtor. The usual choices are Bankruptcy – often described as the last resort option, an Individual Voluntary Arrangement (IVA) – seen as a relatively new solution although IVAs have actually been about for almost twenty five years now – and a Debt Management Plan (DMP).

These are the three principal options available to address personal insolvency. Other options include Debt Consolidation, Debt Relief Orders, Administration Orders, re-mortgaging or selling assets such as a house and using the equity released or sale proceeds to settle debts with creditors. It may be that family or friends may be able to advance funds to the insolvent person to help address debts but a great many people would not be so lucky as to be able to avail of this.

In deciding which option to pursue, the debtor should seek advice from service providers such as ourselves, Stepchange, CAB and Payplan or from any of a large number of commercial providers of insolvency services. More than one such provider should be approached to ensure that not only is the best advice obtained but the full range of solutions is adequately explored and researched.


Let us consider the main choices. For many people, the stigma of bankruptcy is still a major impediment to going down that route and if ruled out the choice is then between an IVA and a Debt Management Plan. Key factors to be considered are affordability, duration, sustainability, acceptability to creditors, restoring credit worthiness and sufficient light at the end of the tunnel to offer some hope of being debt free within a reasonable period of time.

For example, suppose the debts amount to £30,000 and the debtor’s disposable income is just £275 per month. In an IVA lasting five years – the normal duration for most IVAs – the debtor would contribute £16,500 comprising 60 monthly payments of £275, and the remaining £13,500 of debt would be written off. In one more year the debtor’s credit file would begin to be repaired. This ticks all the boxes for the key factors.

If the same debtor opted for a Debt Management Plan instead, the full amount of the debt would have to be repaid and at £275 per month, that would take nine years and two months – assuming all creditors agreed to freeze interests, penalties and other charges, which cannot be taken for granted in a Debt Management Plan, given the lack of legislation governing the process. While the full debt is ultimately repaid, the restoration of the credit file would be at least ten years away.

A Debt Management Plan then does not tick nearly as many boxes as an IVA and it does not have the full weight of the law behind it. From the debtor’s point of view, an IVA can be a much more attractive option than a Debt Management Plan. Certainly, if the projected duration of the Debt Management Plan is five years or more, then the IVA alternative should be fully explored and considered.

A reputable Insolvency Practitioner will of course outline all available solutions and options for the insolvent debtor and provide the pros and cons of each solution. It is best to shop around as no provider has a monopoly of wisdom or experience.

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Fees and key info

We are happy to provide you with debt advice only. We only charge a fee if you opt for one of our debt solutions. Fees will depend on which debt solution we provide and what your personal circumstances are. All fees will be discussed prior to commencement of any service or debt repayment plan. Click here to read our fees and key info. Please note: From time to time we may refer you to other services providers or charities such as the CAB.


If you’d like more information on other sources of free debt help and advice you can visit MoneyHelper – an organisation, backed by government and set up to offer free and impartial advice to those in debt. - Click here to visit MoneyHelper