IVA vs DMP: Which debt solution is right for you?

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This guide will compare an IVA and a DMP, covering the key similarities and differences between them so you can be confident you’ve made the right decision.

Making the decision to deal with your debts once and for all can give you hope for your finances for the first time in a long time. But knowing which debt solution to choose? That’s the tricky part.

From your total debt level to how your credit rating will be affected, there are various factors to be considered before you enter a debt solution.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to make monthly payments towards your unsecured debt over a set period.

Most IVAS last five years but they can last six years if you miss payments and need to make up for the extra money owed.

IVAs must be managed by a licensed Insolvency Practitioner (IP) – a financial expert authorised to represent you and act on your behalf during your IVA.

What is a DMP?

A Debt Management Plan (DMP) is an informal debt solution where you make monthly payments towards your outstanding balance until your total debt has been repaid.

DMPs require you to pay back 100% of your debt and will last for as long as it takes for you to do this. Depending on your debt level, this can take anywhere from five to 10 years.

Because DMPs are informal, your creditors aren’t legally bound to any terms and conditions and are free to change their minds and leave the arrangement at any time.

Do IVAs and DMPs share any similarities?

IVAs and DMPs seem like completely different debt solutions on the surface, but they do share some similarities.

We’ve outlined them below:

Your credit rating will be affected

Like most debt solutions, both IVAs and DMPs harm your credit rating – making it difficult to get a loan, mortgage, phone contract, or bank account during this time.

Most financial experts recommend waiting until after a debt solution has been removed from your credit report before applying for further credit.

You make affordable monthly payments

The aim of most debt solutions is to make your monthly repayments more manageable and affordable and this can be achieved whether you choose an IVA or a DMP.

With an IVA, your IP will base your debt repayments on your income and expenditure. DMPs are less rigid but still require a monthly contribution towards your debt.

You can consolidate multiple debts

Having multiple debts can make it difficult to know who you should make payment to and when.

Thankfully, both an IVA and a DMP can help you consolidate your debts into a single monthly payment without needing to communicate with your creditors directly.

Unsecured debts can be included

Knowing which debts can be included can make the process of finding a debt solution substantially easier.

The good news is, most unsecured debts (e.g. payday loans, utility bills, and credit cards) can be included in both an IVA and a DMP.

IVA vs DMP: How do they differ?

Now that you have an idea of how IVAs and DMPs compare, it’s time to find out how they differ.

Here are the main differences:


The biggest difference between IVAs and DMPs is how long they last. The average length of an IVA is five years although they can last six years under certain circumstances.

DMPs, on the other hand, usually last between five and 10 years. This may sound like a long time, but it can allow you to repay your debt at a slower pace as your monthly payments will typically be smaller.

Debt write off

With an IVA, any debt left over at the end of the five years will be written off – even if you’ve only repaid a portion of what you owe.

DMPs, however, require you to make payments until 100% of your debt has been repaid, meaning there will be no debt left over to be written off

Creditor protection

IVAs can protect you from creditor contact or harassment, allowing you to focus on repaying your debt without having to deal with any unnecessary distractions.

During a DMP, there are no rules stopping your creditors from contacting you.

Frozen interest and charges

An IVA will freeze all interest and charges on your debt before writing it off at the end of your repayment term.

Because a DMP isn’t legally binding, your creditors are not legally obliged to stop interest and charges if they don’t want to and can continue to add fees alongside your repayments.

Third-party involvement

IVAs can only be authorised and managed by IPs, meaning you can’t apply without reaching out to a financial professional first.

DMPs tend to be a little more flexible and can be completed without any third-party involvement. This does, however, mean that you’ll need to manage your own payments and deal with your creditors directly.

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How are joint debts dealt with in an IVA and a DMP?

Joint debt occurs when you enter into a joint credit credit agreement with a partner or spouse and both parties fail to make repayments as agreed. Common joint debts include loans, mortgages, and bank accounts.

Having joint debt can make it difficult to know which debt solutions will cover your debts.

We’ve outlined how joint debts are dealt with in an IVA and a DMP below:


Because an IVA is designed for individual debts, you can’t include joint debts in your arrangement. There is nothing stopping you and a partner from getting separate IVAs at the same time, but each IVA must be applied for and completed as a separate process.

However, you may be able to enter into an ‘interlocking IVA’ – when two separate IVAs are administered together and ‘linked’ to allow them to be paid through a single monthly payment as opposed to two. This is usually only considered if you have a financial connection to the other person (e.g. they are your spouse, civil partner, or child).

Furthermore, having an interlocking IVA doesn’t mean that each party is responsible for the other person’s debt – such is the case with joint debts – and you’ll still only retain responsibility for your own individual debt. The only difference is that two payments will be merged into one, making it easier to manage your finances as a couple.


Unlike IVAs, it is possible to include joint debts in a DMP and repay your debts alongside another individual you share a household with. This can be a good idea if both you and the other party owe debt to multiple creditors and are struggling to keep up with your separate repayments.

Under a joint DMP, both parties are equally responsible for the debt as well as any other financial obligations included in the arrangement. Even if you have other non-joint debts, these can also be included in the joint DMP to ensure you’re only making one payment towards all your debts.

Remember, if you include joint debts in your individual DMP, the lender can still chase the other party for 100% of the money owed. This is due to something called ‘joint and several liability’ which is applied when you take out a joint credit agreement with another person and essentially means both parties are liable for the full amount owed.

Are there fees required for an IVA?

Fees are another important consideration for anyone struggling to choose between an IVA and a DMP.

With an IVA, all fees are paid out of – not in addition to – your normal monthly payments, meaning you’ll never be asked to pay more than what you owe. They are made up of two main charges: the nominee’s fee and the supervisor’s fee.

The nominee’s fee covers the cost of preparing your IVA proposal and sending it to your creditors and is capped at an amount equal to or close to your first four to six monthly payments. This will be covered before any payments are made to your creditors.

The supervisor’s fee covers all the administrative work required, including your annual reviews, and is typically charged at around 15% of the money repaid. This will be taken after the nominee’s fee has been paid.

How much does a DMP cost?

Unlike an IVA, there are no rules about how much a DMP provider can charge. This has led to some companies charging a fee to enter a DMP and others opting not to.

However, the cost of administering a DMP is spread out evenly throughout your repayment plan and at least 50% should go straight to your creditors with this percentage increasing after the first six months.

Remember, if you cancel your DMP, you’re unlikely to get a refund and may have to pay a cancellation fee – this will be written in your original agreement.

Will an IVA or a DMP have a bigger impact on my credit rating?

The first thing many people consider when researching debt solutions is the impact it will have on their credit rating. Unfortunately, entering into a debt solution will almost always affect your credit rating and make it difficult to access further credit for several years.

We’ve outlined how an IVA and a DMP impact your credit rating below:


From the date your IVA is approved, it will be added to your credit file for six years. During this time, your credit score will decrease and you’ll struggle to get a lender to approve you for a loan, mortgage, phone contract, or bank account.

Even if you are approved for credit, you’ll need to get written permission from your IP to borrow more than £500. Failure to do this is considered a breach of your IVA and can result in it being cancelled with immediate effect, leaving you liable for the debt again.

Once your IVA is complete, you should find it easier to rebuild your credit score and will have more luck getting approved for credit. This is because you’ve shown you’re capable of repaying your debts and, as a result, are no longer considered a high-risk borrower.


Unlike an IVA, a DMP isn’t listed individually on your credit report, but the debts included are. This is because it isn’t a legally binding agreement and, therefore, isn’t listed on any public registers.

During a DMP, lenders can apply one of two markers to your credit file: default or ‘arrangement to pay’ (AP). Defaults are automatically removed from your credit record after six years – even if you’re still repaying the debt – while APs stay on your credit file for six years after the debt has been settled.

However, because a DMP helps you settle 100% of your debts, your credit score will gradually start to recover after you’ve made your final payment.

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Is an IVA or DMP suitable for me?

Even with all the information at your fingertips, choosing between an IVA and a DMP can feel like an impossible task.

Generally, an IVA will be better suited to you if your financial situation isn’t likely to improve and you want a debt solution with a clear end date. A DMP, however, will be a better option if you have multiple debts and your financial situation is expected to improve shortly.

Remember, while both an IVA and a DMP can help you deal with your debt, there are various other debt solutions available. Don’t hesitate to contact a financial advisor or debt management company to find out which is better suited to your circumstances.

Can I switch from an IVA to a DMP?

Many people are happy to enter an IVA but later realise it’s not the right debt solution for them and request to leave.

However, while it’s possible to exit an IVA and switch to a DMP, it’s not a decision that should be made lightly due to the consequences it can have on you and your financial situation. Because a DMP is an informal debt solution and isn’t as strict, it’s much more common for people to switch from a DMP to an IVA.

Once you’re sure you want to switch from an IVA to a DMP, you must inform your IP as soon as possible. They will then write to you confirming that your IVA has been terminated and instruct you to cancel any recurring payments coming from your bank account.

Some lenders would rather you tell them that you intend to find another debt solution. This can reassure them that you’re still committed to dealing with the debt and are not trying to get out of paying it.

Key Takeaways

An IVA is a legally binding agreement where you repay a percentage of your total debt to the people you owe money to
A DMP is an informal agreement where you make affordable monthly payments until your total debt is repaid
Both IVAs and DMPs can allow you to consolidate your debts into one manageable monthly payment
You can include joint debts in a DMP but an IVA is only for individual debts
IVA costs are included in your usual monthly payments while DMP costs vary between providers
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:


Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

April 25 2024

Written by
Maxine McCreadie

Edited by
Ben McCormack

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