An IVA (Individual Voluntary Arrangement) and a DMP (Debt Management Plan) are two different routes for people who cannot keep up with unsecured debt repayments. An IVA is a formal legal arrangement that can write off remaining debt at the end; a DMP is an informal repayment plan with no write-off. Understanding the differences can help you work out which route may suit your situation.
This article provides information about IVAs and DMPs. It does not constitute financial or legal advice, and it does not take account of your personal circumstances. If you are struggling with debt, free professional advice is available, details are at the end of this article.
What is the direct difference between an IVA and a DMP?
An IVA is a formal insolvency procedure governed by UK law. It is set up by a licensed insolvency practitioner and, once approved by creditors holding 75% or more of the debt by value, it becomes legally binding on all included creditors. Payments are made for an agreed period (usually five years) and any remaining balance covered by the IVA can be written off at the end.
A DMP is an informal arrangement, typically set up by a debt advice charity or a commercial debt management company. There is no legal framework behind it. Creditors are asked to freeze interest and accept reduced payments, but they are not obliged to agree and can withdraw at any time. The full balance is repaid over time, nothing is written off.
How do they compare side by side?
| Feature | IVA | DMP |
|---|---|---|
| Legal status | Formal, governed by the Insolvency Act 1986 | Informal, no legal protection |
| Who sets it up | Licensed insolvency practitioner | Debt charity or debt management company |
| Fees | Yes, IP fees taken from payments | Not-for-profit providers charge no fees; commercial providers may charge |
| Debt write-off | Remaining balance can be written off at the end | No write-off, full balance repaid |
| Typical duration | 5 years (sometimes 6) | No fixed end date, until debt is repaid |
| Creditor agreement | Legally binding once 75% (by value) agree | Voluntary, each creditor decides individually |
| Credit file impact | Recorded as insolvency for 6 years | Not directly recorded, but defaults and arrears are |
| Payment flexibility | Fixed monthly payment (may vary with income changes) | Payments can sometimes be adjusted more easily |
| Property implications | May require equity release if you own a home | Not applicable |
| Priority debts covered | No, priority debts excluded | No, priority debts excluded |
What are the credit file and credit score implications?
Both arrangements affect your credit record, but in different ways.
An IVA is recorded on your credit file by the Insolvency Service and will remain there for six years from the start date. It appears as a formal insolvency entry and will affect your ability to get credit during that period. Lenders carrying out credit checks will see it.
A DMP does not have a direct entry on your credit file. However, the circumstances that lead to a DMP, missed payments, defaults, and arrears, are recorded individually by creditors and remain on your file for six years from the date each entry was made. If creditors agree to freeze interest and accept reduced payments, they may still mark the account as "in an arrangement to pay" or record a default first.
In practice, both routes are likely to affect your credit score significantly for several years.
What about debt write-off?
An IVA can write off unsecured debt that remains after the arrangement completes. The amount written off is not certain at the outset, it depends on what you can afford to pay each month and what creditors agree to. In practice, write-off amounts vary considerably.
A DMP does not write off any debt. You repay the full balance, though creditors who participate may freeze or reduce interest to help the plan work. Some creditors freeze interest; others do not. If interest continues to accrue, your repayment period can extend significantly.
What can go wrong?
With an IVA:
- If payments are missed or your financial position changes significantly, the IVA can fail. A failed IVA may lead to bankruptcy.
- IVA fees are paid to the insolvency practitioner from your monthly contributions. This means less reaches your creditors in the early months.
- If you own a home, the IVA may require you to release equity in the final year. If remortgaging is not possible, the arrangement may be extended instead.
- Not all creditors will vote in favour. If creditors holding more than 25% of the debt by value vote against, the IVA cannot proceed.
With a DMP:
- Because a DMP has no legal protection, creditors can withdraw from the plan at any time, resume charging interest, or take further action against you including applying for a County Court Judgement (CCJ).
- Commercial DMP providers may charge fees that extend the repayment period. Using a not-for-profit provider avoids this.
- If interest is not frozen, the total you repay can end up higher than the original balance.
- There is no fixed end point. Repayment can take many years for larger debts, which can feel discouraging.
When might each arrangement fit?
An IVA may be worth considering if:
- Your total unsecured debt is substantial (a common threshold used in practice is around £10,000 or more, though insolvency practitioners assess each case individually).
- You have a regular income and can commit to fixed monthly payments over five years.
- You want a defined end date with the possibility of a write-off.
- You need creditors legally bound so that individual creditors cannot take separate action.
A DMP may be worth considering if:
- Your total unsecured debt is manageable enough to repay in full with some breathing room on payments.
- You want flexibility, DMPs can sometimes be adjusted more easily if your income changes.
- You prefer an informal arrangement and want to avoid an insolvency record on your credit file.
- You are not ready to commit to a multi-year formal process.
Neither route suits everyone. A free debt adviser can look at your full financial picture and help you understand which options are realistic for your circumstances.
Where to get free debt help
If you are behind on payments or finding it hard to manage your debts, speaking to a free debt adviser is a useful first step before deciding anything.
StepChange Debt Charity, 0800 138 1111 (free to call, Monday to Friday). Online help also available at stepchange.org.
National Debtline, 0808 808 4000 (free to call, Monday to Friday). Run by the Money Advice Trust.
MoneyHelper, 0800 138 7777. Government-backed service with impartial debt guidance. Also available at moneyhelper.org.uk.
All three services are free, confidential, and non-judgemental. They can explain IVAs, DMPs, and other options such as Debt Relief Orders, breathing space, or bankruptcy, so you have the full picture before you decide.
Frequently asked questions
Does an IVA write off all my debt? An IVA can write off the remaining unsecured debt after the arrangement completes, typically after five or six years of agreed payments. The amount written off depends on what you can afford to pay and is agreed with your creditors at the start. There is no guarantee of a specific write-off amount.
Will a DMP affect my credit score? A DMP itself is not recorded on your credit file, but creditors may record missed or reduced payments, defaults, or arrangement markers. These can affect your credit score and remain on your file for six years from the date they are recorded.
Can I include all my debts in an IVA or DMP? Both arrangements cover unsecured debts such as credit cards, personal loans, and overdrafts. Priority debts, including rent, council tax, and mortgage arrears, are handled separately and are not included in either arrangement.
How long does each arrangement last? Most IVAs run for five years, though some extend to six years if you have equity in a property. A DMP has no fixed end date, it continues until the full balance is repaid, which can take many years depending on the total owed and monthly payments.
What happens if I miss a payment under each arrangement? Missing payments under an IVA can cause it to fail, which may lead to bankruptcy proceedings. Under a DMP, missing payments can result in creditors withdrawing from the plan and resuming collection action, since a DMP has no legal protection.
Are there fees involved? IVAs involve fees charged by the insolvency practitioner, which are usually taken from your monthly payments before creditors receive anything. Reputable not-for-profit DMP providers, such as StepChange, do not charge fees. Always check the fee structure before agreeing to anything.
Related reading
For a broader overview of debt consolidation options, see the Debt Consolidation guide.
- Does an IVA write off all my debt?
An IVA can write off the remaining unsecured debt after the arrangement completes — typically after five or six years of agreed payments. The amount written off depends on what you can afford to pay and is agreed with your creditors at the start. There is no guarantee of a specific write-off amount.
- Will a DMP affect my credit score?
A DMP itself is not recorded on your credit file, but creditors may record missed or reduced payments, defaults, or arrangement markers. These can affect your credit score and remain on your file for six years from the date they are recorded.
- Can I include all my debts in an IVA or DMP?
Both arrangements cover unsecured debts such as credit cards, personal loans, and overdrafts. Priority debts — including rent, council tax, and mortgage arrears — are handled separately and are not included in either arrangement.
- How long does each arrangement last?
Most IVAs run for five years, though some extend to six years if you have equity in a property. A DMP has no fixed end date — it continues until the full balance is repaid, which can take many years depending on the total owed and monthly payments.
- What happens if I miss a payment under each arrangement?
Missing payments under an IVA can cause it to fail, which may lead to bankruptcy proceedings. Under a DMP, missing payments can result in creditors withdrawing from the plan and resuming collection action, since a DMP has no legal protection.
- Are there fees involved?
IVAs involve fees charged by the insolvency practitioner, which are usually taken from your monthly payments before creditors receive anything. Reputable not-for-profit DMP providers, such as StepChange, do not charge fees. Always check the fee structure before agreeing to anything.