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Comparing the options

IVA vs debt management plan

Both let you pay what you can afford rather than what you were contracted to pay. They differ in almost everything else — whether creditors are bound by it, how long it runs, and what happens to anything left at the end.

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What each one is

An Individual Voluntary Arrangement is a formal insolvency procedure available in England, Wales and Northern Ireland. It is set up by an insolvency practitioner, and once enough creditors approve it, every creditor included is legally bound by it — whether they voted for it or not.

A debt management plan is an informal arrangement. Payments are negotiated with creditors rather than imposed on them, so nothing about it is legally binding. A creditor can decline the reduced payment, continue to add interest, or pursue the debt.

That single difference — binding or not — is where most of the others come from.

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If you live in Scotland

Scotland has its own debt legislation, and both columns of the table below work differently there.

There is no IVA in Scotland. The equivalent formal arrangement is a Protected Trust Deed.

Scotland also has a statutory option on the informal side, which the rest of the UK does not: the Debt Arrangement Scheme, run by the Accountant in Bankruptcy, part of the Scottish Government. Under a DAS debt payment programme, interest, fees and charges are frozen from the date of application and are written off when the programme completes. Once the programme is approved, creditors cannot serve a charge for payment, carry out diligence, or petition for your sequestration in respect of the debts included in it. Applications and approved programmes are recorded on the DAS Register, which is public.

So where the table below describes a debt management plan as informal, not binding on creditors, and dependent on creditors agreeing to freeze interest, that describes a debt management plan — including a debt management plan taken out in Scotland. It does not describe the Debt Arrangement Scheme, which is a separate statutory scheme with its own eligibility rules and its own application process.

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How they compare

Statements of fact about how each arrangement works. Which of them applies to any individual depends on circumstances that only an authorised partner can assess.

How they compare
Criterion	IVA	Debt management plan
Status	IVAFormal insolvency procedure, set up by an insolvency practitioner.	Debt management planInformal arrangement negotiated with creditors.
Binding on creditors	IVAYes, once approved. Creditors who voted against it are still bound.	Debt management planNo. A creditor may decline it or withdraw at any point.
Approval needed	IVAThree-quarters or more by value of the creditors who respond must vote in favour. It also fails if more than half by value of the creditors who are not connected to the debtor vote against it.	Debt management planNone. Each creditor decides for itself whether to accept.
Length	IVAA fixed term agreed at the outset, commonly five or six years.	Debt management planNo fixed end date. It runs until the debts are cleared.
Debt remaining at the end	IVAUnsecured debt included in the arrangement is written off on successful completion.	Debt management planNothing is written off. The whole balance is repaid, and because creditors are not obliged to freeze interest and charges, the total repaid can end up higher than the balance at the start.
Interest and charges	IVAFrozen once the arrangement is approved.	Debt management planCreditors are asked to freeze them but are not obliged to agree.
Public record	IVARecorded on the Individual Insolvency Register for the length of the arrangement, and for three months after it ends.	Debt management planNo public register.
Credit file	IVARecorded for six years from the date it starts.	Debt management planReduced payments are reported and defaults may be registered; these stay for six years.
Leaving it	IVAFailing the arrangement can lead to creditors pursuing the original debt, and to bankruptcy.	Debt management planCan be stopped at any time. The original contractual terms resume.

What they have in common

One affordable payment: Both replace separate contractual payments with a single monthly amount based on what is left after essential living costs.
Unsecured debts only: Neither covers a mortgage, rent, or secured borrowing. Some debts, such as court fines and student loans, cannot be included.
Your credit file is affected: Both are recorded and both make borrowing harder while they run and for a period afterwards.
Free help exists: Free debt advice is available from MoneyHelper, an organisation set up by government, and from charities such as StepChange and Citizens Advice. Commercial providers also offer both, and charge for it.

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Which one applies to you is not a decision to make from a table

It depends on what you owe, to whom, what you own and what you can afford — and it is a decision for an authorised debt solution partner, not for a comparison page. Checking what you might qualify for takes about two minutes and will not affect your credit score.

Common questions

Can I switch from a DMP to an IVA?
It is possible to move from one to the other, and people do. It is a fresh assessment rather than a conversion — the arrangement is set up from the beginning, with the approval process that goes with it.
Does an IVA always last longer than a DMP?
No. An IVA runs for a fixed term agreed at the outset. A debt management plan runs until the debt is repaid in full, which depending on the balance and the payment can be considerably longer.
Will my employer find out?
An IVA is recorded on the Individual Insolvency Register, which is public. A debt management plan is not on any register. Some professions have their own reporting requirements regardless.
Are either of these free to set up?
Free debt advice is available from MoneyHelper, an organisation set up by government. MoneyHelper gives guidance and points you to advisers through its Debt Advice Locator rather than running debt management plans itself. Plans themselves are set up free by organisations such as StepChange, a registered charity, and PayPlan, a commercial firm funded by the credit industry. Other commercial providers charge fees, which are taken from the payments made.

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