IVA compared to Debt Management
Comparing the options of an IVA or Debt Management
We receive a lot of calls and emails from the public asking us to tell them about; "IVA compared to debt management"
A debt management plan is an arrangement with your creditors to pay back the debt by regular installments. Instead of you speaking to your creditors yourself to arrange the plan, a Debt Management Company (DMC) does it for you. An IVA, however is a legal agreement with creditors (usually non-priority creditors) to repay your debts. This could either be in part or in full. The arrangement is negotiated, written up and checked regularly by an independent solicitor or accountant called an Insolvency Practitioner. Not all the creditors have to agree to an IVA as long as the creditors to whom you owe 75% of your debt agree.
In this section of the site the IVA unit will explain an IVA compared to debt management. This will help the public understand the IVA and debt management process better.
IVA compared to debt management
- An debt management is private. Compared to an IVA where the details are recorded on the Individual Insolvency Register.
- An IVA monthly payment must be for at least £200-250 compared to debt management where the monthly payment can as little as £80-100 per month.
- An IVA acts as a safeguard to losing your home, compared to debt management which is completely informal so your home can still be financially affected.
- An IVA will have a person debt free (subject to terms and conditions) in up to 5 years, compared to debt management which can go on for many years.
- Up to 75% of your debt can be written off in an IVA, compared to debt management where 100% of the debts have to be paid back.
- A debt management plans may mean your monthly payments will be subject to change, compared to an IVA where the payments do not change, unless the IVA proposal says so.
- An IVA is legally binding compared to an debt management plan which isn’t binding.
- Debt management plans have upfront fees which can be quite high. This leaves you with less money to pay off your debts. Compared to an IVA via Money Advice Direct panel IPs incurs no upfront fees.
- Some Debt management plans are subject to the first month's payment being a fee. This puts your account into arrears by a month or more. These arrears will be recorded on your credit file. Compared to an IVA where it differs.
- Debt management plans are carried out by a non-regulated organisation, compared to an IVA which is carried out by a regulated and accountable professional called a Licenced Insolvency Practitioner (IP).
- An IVA is not suitable where there is uneven/ unpredictable income. A person with more than 20% of their income coming from bonuses or commission, or an unemployed person. Compared to debt management can have an unpredictable income.
- An IVA is not suitable where person is on benefits. A debtor with more than 20-25% of their income coming from benefits. Compared to debt management where the person’s income derive from benefits.
- An IVA is not suitable where the person owns investment properties. Compared to debt management where the person may own more than one property.
- An IVA is not suitable where the person has low surplus income. If the person has a very small surplus income (i.e. 5years of dividend payments amount to less than 20% of the outstanding debt) and there is significant equity in their home. Compared to debt management where the person may have a low imcome.
Advantages of debt management
- A advice agency can set up an arrangement quickly and for free.
- It offers an effective solution if your problem is short term.
- It offers an effective solution if your creditors are prepared to accept lower payments.
Disadvantages of debt management
- Your creditors don't have to accept your offer of reduced payments.
- If they do accept, they can change their minds at any time.
- They may accept it as a short-term measure only, unless they know from the outset that your situation is unlikely to change.
If you wish to discuss the IVA compared to debt management and understand how it can help you please complete the following form or telephone freephone 0800 074 6918.
IVA Guide
- What does it mean if my IVA is not approved?
- What are my options if my IVA is not approved?
- My IVA has been approved, what do I do next?
- My IVA has been approved subject to modification – what does this mean?
- How do I make my IVA contributions?
- My IVA proposal included the provision that I had to sell/realise other assets – what do I need to do?
- I am receiving letters and emails from companies offering me a better solution than an IVA - what are these solutions?
- What do I do if my monthly IVA contribution will be late?
- How do I deal with my creditors once I’m in an IVA?
- How do I deal with additional creditors now that the IVA has been approved?
- What happens if I miss an IVA payment?
- The bank has not transferred my IVA payment - what do I do?
- What happens if I do not inform my IVA supervisor that I can’t make the contribution?
- I'm struggling to make the monthly IVA payment what should I do?
- I've received a 'Notice of Breach' from my IVA supervisor - what does this mean?
- What happens if I’ve missed IVA payments or received a notice of breach and there is no solution?
- Is it possible to finish or settle my IVA early?
- How do I settle my IVA early?
- What is the process involved when offering an early IVA settlement?
- Why would I vary the terms of my IVA?
- What does the IVA variation process involve?
- What happens when the IVA variation process has been approved by creditors?
- What happens when the IVA variation process has been rejected by creditors?
- How does an IVA end?
- Will I receive any correspondence when my IVA has completed?
- If one of my debts has been excluded from the IVA, am I liable to pay the debt after the IVA has completed?
- When does a creditor debt claim have to be received by when completing an IVA?
- What happens if any additional debt claims is received during the IVA closure process?
- How do my creditors get their money in an IVA and what are the IVA dividends?
- Does the money in my IVA account earn interest and if so where does that interest go to?
- Do I get a report or certificate stating the IVA has been completed?
- How does an IVA fail?
- What is the effect of IVA failure or an IVA failing?
- What happens after an IVA fails?
- What are the costs of an IVA?
- Who pays for my IVA?
- What is the IVA process?
- Who takes care of my creditors?
- Will an IVA make me debt free?
- How an IVA benefits my creditors
- Lifestyle changes during an IVA
- Advice on living with an IVA
- Will creditors contact me?
- Will I my IVA fail?
- Completing an IVA
- Getting credit after an IVA
- Can an IVA make me debt free?
- How to boost my credit rating after an IVA?
- IVA vs debt management
- IVA vs bankruptcy
- IVA vs debt consolidation
- IVA vs administration orders
- IVA pros and cons
- IVA definition
- What is an IVA?
- Why choose an IVA?
- Who is suitable for an IVA?
- IVA benefits
- IVA stages
- False IVA adverts
- IVA compared to Bankruptcy
- IVA compared to debt management
- IVA compared to debt consolidation
- IVA compared to administration orders
- How the IVA got so popular and famous
- Things you should know and do before you start an IVA
- Will an IVA make creditor phone calls stop?
IVA's
The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.
In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]
What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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DANGER
Due to the tremendous demand for debt consolidation services the United Kingdom is now overloaded with debt management companies that contain misleading information. [more...]