IVA vs DMP: Which is better for you?

When debt feels overwhelming, it’s easy to believe there’s no way out and that things will continue to spiral. But in the UK, there are structured debt solutions that are designed to help people regain control of their finances. Two of the most common are Individual Voluntary Arrangements (IVAs) and Debt Management Plans (DMPs).

On the surface, they may look similar to each other – both are designed to make debt more manageable. But the way they work, the impact on your finances and their long-term consequences can be very different.

This guide takes a clear, helpful, and supportive look at the difference between IVA and DMP options, helping you understand them better and decide which might fit your situation best.

In this guide:

• What is a Debt Management Plan (DMP)?
• What is an Individual Voluntary Arrangement (IVA)?
• IVA vs. DMP: Key differences
• Benefits of a DMP
• Benefits of an IVA
• IVA vs DMP: Risks and drawbacks
• Which is right for me: DMP or IVA?
• Changing from IVA to DMP (and vice versa)
• Free debt support services
• DMP vs IVA: Key takeaways

What is a Debt Management Plan (DMP)?

A Debt Management Plan (DMP) is an informal arrangement with your creditors. It allows you to pay back your debts at a pace that feels more manageable, usually through reduced monthly payments.

• It’s not legally binding – creditors don’t have to agree
• A third-party provider (such as StepChange) often sets it up and handles payments on your behalf
• Interest and charges may be frozen, but this isn’t guaranteed

DMPs are pretty flexible. If your circumstances change – for better or worse – your payments can usually be adjusted. For a full breakdown of the ins and outs, read our dedicated guide on Debt Management Plans.

What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors. It usually lasts five to six years and allows you to pay back part of your debt, with the remainder written off at the end if you keep up with payments.

• It must be set up by a licensed Insolvency Practitioner
• Creditors are bound by the arrangement once approved
• At least 75% (by debt value) of creditors must agree to the IVA

IVAs offer stronger legal protection but can be less flexible than debt management plans. For more details, see our full guide on Individual Voluntary Arrangements.

IVA vs DMP: Key differences

Here’s a quick overview of the difference between IVA and DMP:

Benefits of a DMP

There are several potential benefits to a DMP which may make it favourable for taking charge of your finances:

• Flexibility: If your income changes, payments can be adjusted
• Less formal: There is no court involvement or legal process
• May help to relieve pressure: Creditors may agree to freeze interest and stop chasing payments
• Easier exit: You can leave a DMP at any time if your situation improves

Benefits of an IVA

Similarly, an IVA has different potential benefits, which include:

• Debt write-off: Remaining debt is cleared once the IVA is completed
• Legal protection: Creditors can’t take further action once the IVA is agreed
• Fixed timeframe: A clear end date, usually five to six years
• Single payment: Simplifies budgeting by combining your debts into one monthly repayment

IVA vs DMP: Risks and drawbacks

While IVAs and DMPs can offer the potential advantages mentioned above, they also involve important risks to consider:

DMP drawbacks:

• There’s no guarantee creditors will freeze interest or charges
• Because it’s informal, creditors could still pursue legal action
• It may take longer to clear your debts compared to an IVA

IVA drawbacks:

• Less flexibility, meaning missed payments can cause the IVA to fail
• Assets (like property) may need be included
• Negatively impacts your credit rating for six years
• Not all debts can be included (e.g. student loans, court fines)

Which is right for me: IVA or DMP?

Unfortunately, there’s no one-size-fits-all approach. Choosing between a debt management plan vs. an IVA depends on your situation:

• If you have smaller debts and need flexibility, a DMP might be better
• If you have larger debts and need legal protection, an IVA may be more suitable
• If your income is uncertain, a DMP’s flexibility could help
• If you need a clear end date and debt write-off, an IVA could help provide that structure

Both options can affect your credit file. For more context on what that can mean for you, see our blog on what is a bad credit score?

Can I change from an IVA to a Debt Management Plan?

Yes, if your circumstances change, it can be possible to change to a different debt solution plan. Here’s what you need to know:

• If your IVA fails (for example, due to missed payments), a DMP may be an alternative.
• Switching from a DMP to an IVA is also possible if your debts grow or you need stronger protection.

It’s always worth seeking independent debt advice to help you weigh up the pros and cons before making the switch.

Free debt support services

You don’t have to figure this out alone. Trusted organisations can help guide you through your options:

• StepChange: Expert advice on DMPs, IVAs and more
• Citizens Advice: Free, confidential support
• MoneyHelper: Government-backed guidance
• National Debtline: Specialist debt helpline

You can also see our list of free support organisations, which contains more options for finding financial help.

DMP vs IVA: Key takeaways

If you find yourself in need of assistance with your financial situation, here are some key takeaways about IVAs and DMPs:

• DMPs are informal, flexible and easier to exit – but may take longer and don’t guarantee debt write-off.
• IVAs are formal, legally binding and can clear remaining debt – but are less flexible and more restrictive.
• Your choice between IVA or DMP may depend on the size of your debt, the stability of your income and whether you need legal protection.

For more guidance, explore a selection of our related blogs, featuring everything from how to use the Debt Snowball Method to coping with financial stress.