Thread: IVA vs DMP

The IVA or Individual Voluntary Arrangement was introduced in 1986 as an essential piece of legislation which allows you to avoid the trauma of declaring bankruptcy. It suits many people who are over £15,000 in debt, provided that they are in regular employment.
An IVA is a legally binding agreement which protects you against any further action from your creditors. Once you've committed to an IVA, you could become debt-free in sixty months.
With an IVA you agree with your creditors to paying only what you can afford in a single payment each month over the period of five years. Your creditors agree to write off your debt which you're not able to repay and they will leave you alone.

With debt management, ( DMP ) you agree to pay a regular amount each month to a debt management company. This company then negotiates new repayments with people you owe money to, usually at lower repayments but over a longer period. The key thing is to be sure that you can afford the new repayment levels so that you don't just add to your problems.

Debt Management can be an excellent solution to your debts, but it will depend on your individual situation. For example, an IVA (Individual Voluntary Arrangement) or another debt solution may be of more help, so it's worth talking first.
When considering debt management, you should also be aware that unlike an IVA (Individual Voluntary Arrangement), it is not a legally binding agreement. There may be other debt solutions available that are more suitable for your debt.

POC means Particulars Of Claim, and relates to a court case.

THIS MIGHT HELP YOU AROUND THIS SITE


Welcome means just that.

Hi DG,

Many thanks for coming back to me and for that link...the amount of info on this site is mind boggling !!

Re IVA's and dmp's - so an IVA is not flexible ? i.e. if over the 5 year period you're paying one back your circumstances change, for good or bad, you're still stuck paying your £***.** every month no matter what ?

Does a dmp have an in built flexibility ? Also, when does this negotiation of new repayment amounts take place exactly ? Do you have regular 'progress meetings' in order to see whether you can pay more ?

Hi venger5 the main difference, is that a dmp is not legally binding, all creditors must agree and you are relying on the goodwill of the creditors, at any time any of the creditors cab start charging you interest and recoomence recovery proceedings against you. Personaly in my opinion dmp's should only be used as a short term measure, for instance whilst searching for a new job, and not as a way of paying the whole debt off.

The IVA can be renegotiated but often creditors will not go below a certain amount and the IVA fails in about 1 in 3 cases. Many of these end up in bankruptcy.

Hi DI,

Many thanks for the additional info.

Hi there

In response to your queries, the debt management plan is an informal arrangement, so is a lot more flexible than the IVA. If your circumstances change, you can inform them and change your payment to your creditors. You can come out of the plan at anytime, and the creditors can too choose not to accept the payment plan at anytime. The main difference with the IVA and dmp is that in a DMP it usually takes a lot longer to clear your debts than in an IVA. In the DMP you would make a monthly payment until your debt is cleared in full, the interest can still be charged, which could lengthen your debt repayment time. Whereas the IVA, once approved is legally binding, all interest and charges are frozen, and you would make a monthly payment into the IVA for 5 years and then the remainder of your debt is written off and your credit rating is wiped clean after 6 years.
The IVA is reviewed annually, so it can be quite flexible. If you get an increase in income, or increase in expenses you would need to let the IVA company know, as your payment would need to change. Changes in circumstances are normal during 5 years which is why the IVA is reviwed on an annual basis.

Hi Loobyloo,

Many thanks for the greater detail, much appreciated.

Can somebody give me some advice for a friend of mine please.
She has had an IVA for 3 years but is now in arrears with her rent and the Landlord went to court for possession and a money order, both were granted. Can the Landlord go to her IP? What else could the Landlord do with the money order?

I would suggest that your friend informs the supervisor of the IVA asap. This way, your friend can make a payment plan within her budget for the IVA in order for her to keep her home.
I am not 100% sure if your landlord can go directly to your IP, as the landlords are not usually contacted in an IVA.

Thank you for your reply. She is worried that the Landlord might get a CCJ against her. She had the IVA before she took over her current tenancy so not sure if the Landlord knows about it. She is getting herself into a real state. Any advice will be really appreciated thank you.

Just going back to my original post, a friend of mine was told yesterday by Payplan that an IVA could not be offered to someone who is still solvent.

I.E. he could wipe the debt out by selling his house and use some of the proceeds to clear the debt.

He has a sizeable debt and is in regular employment but they've offered only a dmp over 5-6 years, which seems to go against some of the info I've read here, which has said that a dmp is really only a short term solution.

To me it seems an IVA is a 'safer' solution but it was never offered.

Does this sound correct ?

Thank you Wintry for your comments, in answer to your questions:-
1. She is currently waiting for the bailiffs Notice, the Landlord won't tell her when she can go just keeps saying it is up to her!
2. Yes she has lost her job & currently on benefits.
All of which she finds scary any advice greatly appreciated. Thanks

Originally Posted by Gonka

Thank you Wintry for your comments, in answer to your questions:-
1. She is currently waiting for the bailiffs Notice, the Landlord won't tell her when she can go just keeps saying it is up to her!
2. Yes she has lost her job & currently on benefits.
All of which she finds scary any advice greatly appreciated. Thanks

Hi.With regards to the landlord saying its up to her when she can go-The way I see it is this -If a possession order is granted (and not suspended) then it is usually set for 28 or 56 days after which the landlord would have to apply for a warrant to evict (bailiffs). A Money Order is not quite a CCJ until enforement action is taken. Sorry but more info needed -1. How much are the arrears and what ground(s) has the landlord (private I presume) used in the claim for possession ?2. Does she receive housing benefit?3. Does she want to stay in the current home?4. Has she anywhere else to go if she has to leave?5. Has she assets of any value?6. Has she missed any payments on the IVA?7. Is there any particular reason why she may not want to contact her IP?8. Is she likely to find suitable employment in the near future?Appreciate that there are a lot of questions (and these are not likely to be enough) but as I said before, more information is needed before anyone can realistically offer advice / support. As there are a number of potential serious issues and risks for your friend here she should contact an advice agency ASAP with full details of her circumstances.

Hi Venger

In response to your post. In order to qualify for an IVA, you must show that you cannot pay your debt back in full within 5-6 years. If a person can repay a debt in 5-6 years in full based on making their surplus payment each month, plus selling any assets to help clear it, the person is considered solvent. You must be insolvent and not be able to clear your debts in unfder 5-6 years before you are eliegible for the IVA.
The way they would look at it is, they would take the total level of debt owed, the surplus and any value of assets into consideration before deciding if someone is solvent.
I hope this helps, it can be hard to explain

Hi Loobyloo,

It helps a lot and makes sense so many thanks for the further clarification.

It's much appreciated.

Im afraid i have to disagree loobyloo, some perople pay their IVA's in a small number of large payments. The rules do not state that you need to be able to pay or not within a certain period of time.

to be insolvent and therefore able to enter an IVA you must be unable to pay your debts as they fall due. so for instance if a debt goes into default the whole amount is due straight away, presuming that you cannot pay the whole amount straight away you are insolvent and able to enter an IVA. Many IVA's pay the full amount back during their course plus statutory interest

Hi debt info, I understand what you are saying, and further to my previous post, it is difficult to explain, but I know that when I enquired at Payplan about an IVA before entering my dmp, they explained that due to my level and debt and monthly payment, I would not be eligible for the IVA as I am solvent. To them, they would not be able to try for an IVA as the creditors are straight away going to reject any IVA proposals that show them that they can clear the debts in full in 5 years. The creditors would rather get the full amount back in payments in an informal plan, rather than having to accept only a percentage in a 5 year IVA. Also, where assets are concerned, if the creditors can see that a person owes £15K, but has a car or property or savings of £15-£16K the creditors would ask them to sell this asset to clear the debts rather than making monthly payments.

true, but often they will accept a 100% IVA where you pay the whole amount back via monthly payments over the 5 years. I personally know of several people who have done this, Maybe payplan just prefer dmp's for their own reasons

the only bar to the IVA process is if you are solvent and that is if you can pay the full legaly required monthly payments ar per your contract

I might have missed it, but nobody seems to mentioned that when on an IVA, in the final year, if you have any equity in your home, you have to remortgage and the creditors are entitled to that equity. Also if you fail to make a payment on an IVA your creditors can petition for bankruptcy. I'm on a dmp because these things concerned me.