Debt Management Plan or IVA – which is better for me?

26 June 2008

What’s the difference between an IVA (Individual Voluntary Arrangement) and a debt management plan from a debt management company such as Gregory Pennington?*

If you’re if debt, of course, the real question is: “Which would be better for me?” Take a look at the most important similarities and differences.

Debt management plan & IVA – main similarities
In some ways, the benefits they offer are quite similar. Both debt solutions:

• Involve asking a specialist to negotiate with creditors on your behalf.
• Deal with unsecured debts (e.g. credit cards and overdrafts, not mortgages or secured loans).
• Help people who can’t afford to maintain their debt repayments.
• Involve replacing multiple payments with just one – to the financial organisation, which distributes funds among the creditors.

Debt management plan & IVA – main differences
In some ways, they’re very different:

• An IVA is only for larger debts – in most cases, £15,000 or more.
• A debt management plan can help people deal with small or large debts. Gregory Pennington’s debt management plan is there to help people who owe £2,000 or more.
• An IVA is a legally binding agreement, which must be set up by an Insolvency Practitioner (IP). Once it’s accepted, creditors and individuals alike are bound by the arrangement.
• A debt management plan is an informal arrangement. Creditors and individuals are free to change their minds at any point.
• An IVA – if accepted – is guaranteed to result in lower monthly payments and freeze interest on the debt.
• In a debt management plan, creditors are asked to accept lower monthly payments and freeze interest. They’re not obliged to do this, but there’s a good chance they’ll see it as the best way to help you repay the money.
• An IVA is (in most cases) a five-year commitment, with fixed monthly payments. No-one can tell the future, but creditors won’t approve an IVA (and the debt specialist’s IP won’t ask them to) if they don’t think the individual will be able to maintain regular payments.
• A debt management plan isn’t ‘set in stone’. We can tell you how long it’ll take you to pay off your debts and how much you’ll pay every month, but this can change if your disposable income goes up or down, or if creditors change their minds about freezing interest and/or accepting reduced payments.

Debt management – why go to a professional?
If it seems debt management might be a good solution to your debt problems, you might wonder why over 40,000 people are on Gregory Pennington’s debt management plan right now. Why don’t they manage their own debts?

Basically, anyone can talk to creditors and ask them to:

• accept lower monthly payments,
• freeze/reduce interest, and/or
• waive charges.

But there’s no guarantee they’ll be successful. Gregory Pennington …

• Have been dealing with creditors since 1993 – we’re used to negotiating with them, and we have an excellent relationship with all major creditors.
• Aren’t emotionally involved – if your relationship with your creditors isn’t as good as it could be, you might prefer to have a professional dealing with them on your behalf.
• Are used to dealing with the time-consuming, organisational side of finance – the paperwork, the phone calls, the maths, etc. The more complicated your financial situation is, the more you might appreciate this.
• Can offer you a single point of contact – your own Personal Finance Manager, who’ll handle your debt management plan. You’ll be able to speak to the same person every time you have a problem or a question.

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*IVAs and debt management plans aren’t the only debt solutions available. Depending on your situation, you may wish to consider a debt consolidation loan, debt consolidation mortgage or Trust Deed (for residents of Scotland). You can discuss it with an expert debt adviser on 0800 161 3516.

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