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Written by at PayPlan, Grantham on

Two of the most common debt solutions that our clients opt for are DMPs and IVAs. They are two very different options and many people have to choose between the two.

How do you make such a decision? Here is our handy guide to see what is involved in each plan.

Debt Management Plans

  • This is an informal arrangement between you and your creditors
  • House could be at risk as creditors can force Bankruptcy or apply to the court to secure the debt against your property.
  • Legal action is possible.
  • Credits can still make contact with you regarding your debts.
  • Creditors can change their minds about the repayment plan at any time.
  • Flexible repayment plan.
  • Repay all of your debts plus interest and charges.

Apply for a DMP

Individual Voluntary Arrangement

    • House is safe as long as you maintain repayments.
    • You would usually need a minimum surplus of £100
    • Legally binding agreement so creditors cannot pursue any further legal action.
    • Creditors can only contact you when sending annual statements
    • Once your proposals are approved creditors cannot change their minds.
    • Your proposals set out your repayment plan for the duration of the IVA, any reduction must be approved by your creditors.
    • Any debt remaining after your IVA is completed is written off.
    • You can hold most official employment roles whilst in an IVA that you wouldn’t if you were to go bankrupt.

Apply for an IVA

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  • Stuart

    You suggest bankruptcy is a risk in a debt management Plan when it is much more of a risk in an IVA and an OFT requirement to mention that risk. You also say a minimum £100 disposable income is needed for an IVA when in practice no one would get an IVA at that level. Who wrote this ?

  • Stuart

    Are you saying that in Payplan’s experience the risk of bankruptcy in a DMP is greater than in an IVA and that you also administer IVAs with payments of £100 a month ?

    • Gemma

      No greater, however it is still a risk that is worth mentioning. It is a risk with IVA’s and we talk to all of our clients about any potential risks with any plans.

      As a rule we do say that the minimum amount of disposable income for an IVA is £100.

  • Stuart

    Have Payplan ever administered an IVA at £100 per month ? Apart from the vulnerability to the slightest increase in priority debt outgoings over 5 years, it would barely cover your fees would it ?

    • Gemma

      Yes we have, we would only ever do that it we felt that it was sustainable for the client.

  • Stuart

    Do you refund the fees if an IVA fails at that level or is all the risk on the customer ?

    • Gemma

      All of the risks are explained to each and every client who enters into an IVA. We would never set up an IVA if we did not think it would be sustainable.

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