Many people choose an informal, flexible plan to manage their debts called a DMP. Perhaps you did, but have now changed your mind? Can you change from a DMP to an IVA?
Jump to contents:
- Reasons to change from a DMP to an IVA
- Disadvantages to an IVA compared to a DMP
- How do you make the change?
Want to switch to an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
Reasons to change from a DMP to an IVA
There are many reasons why you might have chosen a DMP over an IVA to start with. Usually the choice is based around how settled your situation is. If things are changing then a DMP is a good temporary solution. An IVA however is for more certain situations, where income and expenditures are more stable.
It is often overwhelming when trying to choose between a DMP and IVA. Sometimes this results in debtors choosing the DMP and monitoring it for 6 months to see how it goes. They then have time to understand better their options and get a feel for how a new budget might work. Understanding what you can afford each month it critical for any plan to succeed.
If your situation was uncertain, perhaps due to job change, health reasons or family changes, a DMP can be a good fit. However once those uncertainties settle, then an IVA can be considered as perhaps a better option.
A DMP works well as a quick fix, temporary solution or perhaps for smaller debts. Larger debts over a longer period are often better solved with an IVA. However in the end, you get to choose.
Disadvantages to an IVA compared to a DMP
It is important to understand that the IVA is a very different proposition to a DMP. You may be focussed on the debt write off and the fixed 5 year term, but there are other things for you to consider.
The DMP is flexible, the IVA is not. You cannot easily change your monthly payments once agreed. You will be expected to pay as much as you can afford at all times. If you have varied income or unpredictable expenses, the IVA may quickly fail, so understand you will have to budget carefully.
You will have to provide far more proof of your situation in an IVA. If your creditors are going to write off a large amount of your debt, you will need to pay as much as you can afford. If not, the creditors will simply not accept the IVA in the first place. You will also need to continue to provide paperwork proof at each annual review during the IVA.
If you earn overtime in an IVA, half of this has to be paid to your IVA. Any windfalls like an inheritance or redundancy payment are also paid into the IVA. In a DMP you could keep these extra monies.
How do you make the change?
It is fairly straightforward. In fact if your DMP has been set up well, then you will already have a budget set up as a starting point. The key difference is that the IVA has to be set up and supervised by a licensed insolvency practitioner. A DMP could just be set up by you.
We can advise you on how the process works and walk you through the application. You will need to supply various paperwork proving details about you and your situation. Again we will give you all the help you need to provide this.
The process usually takes around 6 weeks. During this time you should continue paying into your DMP if they are affordable. This should prevent your creditors taking any action against you during the set up stage.
Don’t worry about how your creditors will react to you starting an IVA. You do not have to tell them directly if you don’t want to. They will receive the proposal directly from the Insolvency Practitioner.
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