Which is the most suitable for me?

Formal or informal?

An IVA is a formal agreement.

An IVA is formal meaning it's a legal binding agreement.

By that we mean it is legally binding and set up using insolvency laws by an Insolvency Practitioner. Once in an IVA, you cannot change your mind without risking adverse consequences unless you can come to some other arrangement to repay your debts.

Any given creditor can choose to vote against the IVA, but they must participate if it gets enough votes to be passed.

Debt management is an informal agreement.

You can return to paying creditors directly at any time. Often people enter debt management to cover a period of reduced income and return to paying creditors directly when they can afford to.

Any given creditor can choose not to participate; so you must make arrangements to pay them outside of the plan.


Debt management plan providers are regulated by the FCA (Financial Conduct Authority).

IVA companies are not themselves regulated, it is the individual insolvency practitioners who are regulated by one of the professional bodies; in our case the IPA (Insolvency Practitioners Association).

Total debt and repayment levels

For a debt management plan £1,500 of unsecured debt with at least 2 creditors, paying back £80 per month (or £20/week for weekly payers) is a typical minimum payment. Anything less than that, then it is questionable how worthwhile the plan would be.

For an IVA you need to have at least £8,000 of includable unsecured debts and be able to afford at least typically £80/month to pay into an IVA. These values are not defined by legislation and will vary between IVA providers.

For an IVA a standard requirement is that the debt must be more than 72 times your IVA payments to make it worthwhile; otherwise, a debt management plan would be more suitable.

Amount Paid Back

Debt is repaid in full on a debt management plan.

A portion of the debt is usually written off on an IVA.
You should be able to repay at least 10% or less than 90% of the initial debt over the standard 60-month duration of the IVA, the further from these extremes the more typically the IVA.

Interest And Charges

On debt management, it is requested of creditors that all interest and charges cease. They are not obligated to do this or even agree to be part of the plan.

However, for debts from personal borrowing, the regulator expects all interest and charged to be stopped while the plan is in operation.

On an IVA, all interest and charges are stopped from the day the IVA is approved.

Your Assets

Assets are a factor in an IVA

To be accepted for an IVA you must be insolvent. In most cases, this means your debts outweigh your assets, and you cannot afford to repay all your debts by the required terms. By assets, we mean items you could use to raise money to pay creditors, for example, a house, car, stocks and shares etc.

An IVA is intended to be a less severe alternative to bankruptcy. Instead of the courts potentially taking everything from you as in bankruptcy, you have the opportunity to avoid this by paying back whatever you can over five years. For homeowners with equity in their property, this means typically remortgaging at some point during the IVA to raise funds to pay towards the IVA, see IVAs and Homeowners for more details about this.

IVAs with more equity than debt.
If you already have bad credit, it can difficult to get a mortgage or secured loan to repay your unsecured debts. Therefore in such circumstances, we can look to see if an IVA is the best solution for all parties.

Assets are not typically a factor in a debt management plan.

You do not have to be insolvent to be accepted on financial management, meaning your assets can be worth more than your debts. However, any creditor may choose to ask about your assets and can reject any reduced repayment offer on these grounds.

Debt subject to a CCJ – Court Judgement

Insolvency law states that when someone applies for an IVA, all their unsecured creditors must be treated equally, with no advantage being afforded to one over another. This is even the case when a CCJ, has been awarded. Therefore in an IVA CCJ are included as a creditor.

In debt management, CCJs must be budgeted for outside of the plan.

Consequences Of Failure Of An IVA

The consequences of failure to maintain IVA payments is greater.

On debt management, failure to maintain payments is easier to address, by renegotiating the terms of the agreement.

On an IVA, while variations in payments can be renegotiating, this is less straightforward.

If the IVA fails at say, the halfway point (30 months), then it is not the case that half the debts are repaid, and you can negotiate from that position. Debt write-off is only upon the successful conclusion of the IVA. Initial payments go towards the costs incurred in setting up the IVA and not towards clearing the debts.

If an IVA fails early, you are likely to find yourself in a worse position than before. This is why an IVA is a serious undertaking that must have a high degree of confidence of success from the offset.

Please call 0800 014 9675 or a contact us if you have any questions or require some assistance with your debts.