I'm Struggling With My Debts – Should I Choose A Debt Management Plan Or An IVA?

If you're struggling with your debts, and you've looked for a debt solution to help, then you've probably encountered two possibilities; Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA).

Both of these debt solutions should normally elicit a freeze on interest and other charges, and by the end of both solutions you should be debt free.  So what's the difference?

Individual Voluntary Arrangements

An IVA is a legally binding agreement between you and your unsecured creditors in which they agree to freeze interest and other charges, as well as accepting a lower fixed regular repayment.  After a set period of (usually) 5 years, provided you have made all your repayments the outstanding debt owed is written off.

Once an IVA is agreed, for as long as you keep to the terms of the IVA then creditors may not contact you again regarding repayment and you're protected from court action with regard to your unsecured debts.

With a Payplan IVA you make one payment each month and Payplan distribute the money to your creditors; and what's more, unlike the vast majority of other debt management companies, with Payplan you don't have to worry about paying any fees you would normally associate with an IVA.

Debt Management Plans

A DMP is actually an informal agreement made between you and your creditors.  Creditors usually agree to freeze interest and other charges, and they sometimes accept a regular standard payment from you every month that is lower than the actual owed repayment.

A DMP works well for many debtors and creditors alike, but it is not a legally binding agreement and so there's actually nothing to protect you if a creditor decides to re-apply interest charges at any time, or even if they decide to pursue the debt through the legal system.  A creditor may, for example, consider the DMP to be invalid if an agreed monthly payment has been missed.  In this case, interest may be re-applied or court action may be pursued.

A DMP lasts for as long as you still owe money to creditors, and when you've repaid the debt according to the terms of the DMP, you're debt-free.

With a Payplan DMP, you would just make one monthly payment, and Payplan distributes that payment to your creditors.  You will not be charged any fees with a Payplan DMP.

Next Steps

Now you're hopefully a little clearer on the differences between an IVA and a DMP, but what you really need next is the most important bit of all.

You need impartial debt advice from an ethical debt management company.

There are companies that offer free impartial advice that is tailored to your exact circumstances.  And what's more, these services and debt solutions shouldn't cost you a penny, because an ethical debt company will receive income primarily from the credit industry rather than from fees charged to clients.

For more information about whether an IVA is suitable for you visit www.payplan.com

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