IVA vs Debt Management Plan: Key Differences Explained
Published 23rd of September 2016·Updated 24 April 2026
Reviewed by: Reviewed for accuracy April 2026
An IVA (Individual Voluntary Arrangement) and a Debt Management Plan (DMP) are both ways to manage unaffordable debt, but they work very differently. An IVA is a legally binding insolvency solution that can write off a portion of your debt, while a DMP is an informal arrangement to repay everything you owe at a reduced rate.
Short Summary
An IVA is a formal insolvency solution approved by a court. It binds your creditors by law, freezes interest, and writes off any remaining debt at the end of the agreed term, typically five years.
A DMP is an informal arrangement with no legal force. Your creditors are not obliged to accept it, freeze interest, or stop collection activity, though many do in practice.
Your credit file is affected by both options for up to six years. However, an IVA also appears on the public Insolvency Register for the duration of the arrangement.
An IVA generally requires a minimum debt of around £6,000 and a regular income. A DMP has no minimum debt level, making it more accessible for people with smaller balances.
If you are unsure which option suits your circumstances, a free debt adviser at StepChange or Citizens Advice can review your finances and recommend the right route.
What is the legal difference between an IVA and a DMP?
An IVA is a legally binding agreement governed by the Insolvency Act 1986. Once approved by at least 75 per cent of your creditors by debt value, all creditors are bound by its terms. They cannot add further interest or fees, contact you directly, or take enforcement action.
A DMP carries no legal weight. Creditors who do not agree to your repayment plan can still charge interest, issue default notices, and pass your account to a debt collection agency. Many creditors do cooperate with DMPs, particularly if arranged through a reputable service such as StepChange, but there is no guarantee.
How long does each solution last?
An IVA typically runs for five years (or six years if you include a payment from home equity at the end). At the end of the term, any remaining debt included in the IVA is legally written off, even if you have not repaid the full amount.
A DMP has no fixed end date. It continues until every penny of the original debt is repaid. If creditors continue to add interest, the repayment period can be considerably longer than originally projected. StepChange's 2023 data indicates that some DMP clients take over seven years to clear their debt.
How does each option affect your credit score?
| Factor | IVA | DMP |
|---|---|---|
| Stays on credit file | 6 years from start date | 6 years per default notice |
| Appears on Insolvency Register | Yes, while active | No |
| Interest frozen | Yes, legally | Often, but not guaranteed |
| Remaining debt written off | Yes, at end of term | No |
An IVA is recorded on your credit file for six years from the date it begins. If your IVA lasts five years, it drops off your file one year after completion. A DMP does not appear on the Insolvency Register, but any default notices issued by creditors remain on your credit file for six years from the date of issue.
How much debt do you need for each option?
Most insolvency practitioners require a minimum of around £6,000 in unsecured debt before they will set up an IVA. You also need a regular, stable income to make the monthly payments.
A DMP has no minimum debt threshold. If you owe £2,000 across two credit cards, a DMP can be an appropriate way to manage repayments at a rate you can afford. StepChange offers free DMP setup with no minimum debt requirement.
What happens to your debt at the end of each arrangement?
With a DMP, you repay the full balance you owe. The plan ends only when every creditor has been paid in full. If creditors have continued adding interest during the DMP, the total you repay may exceed your original balance.
With an IVA, you make fixed monthly payments based on what you can realistically afford. At the end of the five-year term, any remaining debt included in the IVA is written off entirely. This means you could legally leave an IVA having repaid only a fraction of your original debt.
Which option requires creditor approval?
An IVA requires creditors representing at least 75 per cent of your total debt (by value) to vote in favour. If they do, all creditors including those who voted against are legally bound by the terms.
A DMP does not need creditor approval. You (or a debt management company) simply propose a repayment schedule and begin making payments. Creditors may accept, reject, or ignore the proposal. Those who reject it retain the right to pursue the full debt through normal collection methods.
FAQ
What is the main difference between an IVA and a DMP?
An IVA is a legally binding insolvency arrangement that writes off remaining debt after typically five years. A DMP is informal, requires full repayment of all debt, and does not bind creditors. An IVA is a more serious step but offers greater debt relief.
Will an IVA or DMP show on my credit report?
Both affect your credit file. An IVA is recorded for six years from the start date and appears on the public Insolvency Register. A DMP is not recorded directly, but default notices from creditors during a DMP stay on your file for six years each.
Can creditors still contact me during a DMP?
Yes. A DMP does not legally prevent creditors from contacting you or adding interest. In practice, many cooperate with established DMP providers such as StepChange, but there is no legal obligation for them to do so.
How much does an IVA write off?
There is no fixed percentage. The amount written off depends on what you can afford to repay over the IVA term. Some people repay 30 per cent of their debt; others repay more. Your insolvency practitioner will calculate a realistic monthly payment based on your income and essential outgoings.
Which is better for someone with a small amount of debt?
A DMP is generally better for smaller debts, typically under £6,000, because most insolvency practitioners will not set up an IVA below that threshold. A DMP is also less damaging to your credit profile in situations where creditors agree to freeze interest and no defaults have been issued.
Is a DMP free to set up?
StepChange and other non-profit debt charities offer free DMP setup. Some commercial debt management companies charge setup and monthly management fees, which reduce the money going to your creditors. Always check whether a provider charges before signing up.
Do I need a solicitor for an IVA?
No. An IVA is set up by a licensed insolvency practitioner (IP), not a solicitor. Your IP acts as the supervisor of the arrangement and distributes your monthly payments to creditors. You can find licensed insolvency practitioners through the Insolvency Practitioners Association (IPA).