Unofficial estimates have suggested 100,000 people every year carry out a Debt Management Plan (DMP). The real number could be much higher than this. The reason for their popularity is unclear however many people do use this type of debt solution because of the flexibility it offers. You can change or stop the Plan at any time. In addition as a home owner you are not obliged to release money from your property to put towards your debts. However with these Plans often lasting for many years should you change to IVA?

What are the reasons you might change to IVA?

There are some significant downsides to using a Debt Management Plan. Firstly you have to repay everything that you owe. If your debt is large this could take many years. In addition there is no legal requirement for creditors to stop their interest and late payment charges. As such, there is no guarantee that balances will decrease each month and no specific end date to the debt problem can be given.

If you are in a DMP you must consider that you get no legal protection from your creditors. Any of them can still chose to take further action against you to enforce their debt such as applying for a County Court Judgment (CCJ) and then an attachment of earnings against you or a Charging Order against your home.

Having considered these issues you may be thinking that you might be able to become debt free faster if you use a different debt management solution. However should you change to IVA?

Should you change to IVA?

If you are unhappy with your Debt Management Plan you can decide to stop the arrangement and use a different debt solution at any time. The alternative solution that you are likely to consider is an Individual Voluntary Arrangement (IVA).

The significant advantage of this solution over debt management is that the agreement lasts for a fixed period of time. Generally you will make payments towards your debts for 5-6 years. After this the Arrangement is over and any outstanding debt is written off. As such you will be debt free long before you would be had you stuck with your DMP.

Of course not everyone should change to IVA. If you are a home owner it is important to recognise that you will be obliged to release equity from your property if you can. You may not want to risk having to do this. However if you are unhappy with your Debt Management Plan you should certainly take time to review the IVA option to see if you might benefit from it.