Stop your DMP and Start an IVA

Stop your DMP and Start an IVA

An IVA can offer significant benefits. However whether you should stop your DMP and start one depends on your financial circumstances.

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Will your Debts be Paid Off Faster?

One of the significant downsides to a DMP (Debt Management Plan) is you have to pay your debts in full. As a result this solution will typically last between 5-10 years.

On the other hand an IVA normally lasts just 5-6 years. After you have made your final payment any outstanding debt is written off.

For this reason if your stop your DMP and start an IVA you are likely to become debt free much faster.

If you can afford to repay all your debt in less than 5 years using a DMP changing to an IVA is unlikely to give any benefit.

Will your Monthly Payment Change?

The payment you make into a DMP or IVA is based on the same figure – your disposable income. This is that amount left after your monthly living expenses are deducted from your income.

For this reason if you stop your DMP and start an IVA the monthly payment you will have to make should be the same. However there is an exception to this.

Normally you need to be able to pay at least £100/mth to start an IVA. If you cannot afford this and are paying less into your DMP you may not be able to change.

If you cannot afford the minimum payment required you might still be able to do an IVA based on a lump sum payment.

What happens if you are a Home Owner?

A DMP does not give your property legal protection from your creditors. However your home is generally not at risk as long as you maintain the payments. In addition there is no obligation to release equity to help pay your debt.

An IVA does provide legal protection. However you have to agree to a so called equity release clause.

In the 5th year of the Arrangement you will be obliged to release equity from your property if this is possible. As a result the overall amount you repay towards your debts is increased.

If there is no equity in your property or there is but it cannot be released your IVA payments will be extended by 12 months instead.

Is your Credit Rating likely to get Worse?

You might think if you stop your DMP and start an IVA your credit rating will get worse. In fact this is not the case.

Generally speaking if you stick with a DMP your credit rating will remain poor until you have paid your debt and the Plan is finished. This might not be for 5-10 years.

If you start an IVA your credit rating will be affected for a maximum of 6 years. After that it will significantly improve. As such for many people switching to an IVA could actually speed up the repair of their credit file.

If you stop your DMP and start an IVA you will still find it difficult to get credit for the next 6 years.

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4 thoughts on “Stop your DMP and Start an IVA

  1. Linda says:


    I am in a DMP at the moment. My payments are nearly up to the £50 per month required to go on an IVA and my company is pushing for either Bankruptcy or an IVA. I really do not want Bankruptcy as I am a private tenant and this could affect any future renting.

    The problem they have is my debts long term will not be paid off for a long time but I am increasing them every year with my review. I have never missed a month since I have been with them.

    Also I will have a lump sum to pay off some of the debts in due course. I do not know when this will be but it is from a will. It will not clear the debts but will certainly help with the long term finishing date. They are aware of this.

    With all this in mind can they force me off the DMP onto an IVA or bankruptcy?

    I do appreciate your advice and thank you.

    1. Hi Linda

      I would make a couple of points. Firstly no one can force you to start an IVA or go bankrupt. If your current debt management company refuses to continue with your Debt Management Plan you can always switch to a different company. You could test the water by speaking to one or two different companies before making any decision.

      Secondly my view is you should not be considering an IVA unless you can make monthly payments of at least £100/mth. Anything less than that and I simply cannot see how an IVA would be workable.

      Thirdly you are right, your credit rating will be affected if you go bankrupt. However it will be no worse than if you started an IVA. Both solutions have exactly the same affect on your credit rating. Given this if you are currently renting, you cannot afford an IVA and it is going to take you years to repay your debt using your DMP bankruptcy might be a sensible option to consider.

  2. Ben says:


    I’m currently in a DMP through step change, owing approx £12000. I keep getting phone calls of people trying to get me into an IVA. Is this a better option for me?

    I do extra work sometimes. Is it possible to pay small lump sums into an Iva?

    1. Hi Ben

      This is not a simple question to answer without knowing more about your situation.

      One thing to consider is the amount you can pay towards your debt each month. If this is anything less than £200/mth then an IVA might be better for you. This is because an IVA normally only lasts 5 years. As such if you are currently paying £120/mth into a DMP it will take you 8 more years to pay your debt. An IVA would last 5 years and then any debt not paid would be written off.

      That said if you do extra work like overtime 50% of the extra money you earn has to be paid into the IVA. This does not reduce the length of the arrangement. You still have to pay for 5 years.

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