If you are one of the many people in the UK who are looking to become debt-free, there are two debt solutions that you might want to consider and these would be: an IVA or an individual voluntary arrangement or a debt management plan or program. However, before making a choice, you need to make sure that you completely understand how each of these options work first so that you can be certain that the one you would be going for would be the best for your particular situation. Read on for to learn the difference between an IVA and a debt management program.

IVAs or Individual Voluntary Arrangements

An IVA or an individual voluntary arrangement is type of legal debt management agreement which usually lasts for about five years. The primary goal of an IVA is to reduce your debts through making agreed monthly payments to each of your creditors which can, in turn, allow you to make a clean start after paying off your debt.

One thing that you need to keep in mind before getting an individual voluntary arrangement would be that you could not set up an IVA by yourself. There is also a specific amount that you need to owe first before being eligible for applying for an IVA; if you debt is lower, you cannot get an IVA. You would also need to work with a licensed insolvency practitioner who can make the arrangements for you based on your personal financial situation. After your IVA is approved, your creditors could no longer chase you for the money, provided that you would be adhering to the conditions of the IVA. Additionally, you can also have the interest to be reduced or frozen and your outstanding debt to be written after the IVA is over. This, however, would depend on the terms of your IVA.

Debt Management Plans

If you choose to get a debt management plan, you would also need to agree to a monthly repayment to your creditors so that you can pay off all of your debt. This is usually done through a debt management firm or company. They would basically be assessing your financial situation and then provide you with several debt solutions you can choose from. The debt management company would manage your chosen plan and would make the payments on your behalf. You can also choose to set up your own debt management plan and then deal with your creditors by yourself.

A debt management plan is different from an IVA in that it does not require you to have a minimum amount that you owe first. This means that if you have a smaller debt and would like to get rid of it, the better option would be to look for a debt management program. Also, although both options can reduce or freeze your interest but it is only an IVA which can write off any debts that you are unable to repay after the end of the agreement. IVAs also usually last for a period of five years while debt management plans can run for shorter or much longer periods, depending on the type of plan that you would be choosing.