Can I Change from IVA to Debt Management?

Individual voluntary arrangements (IVAs) are one of the most common agreements made between creditors and debtors when you’re struggling to pay your bills.

IVAs are formal, legal contracts, but if your circumstances change, you might wonder: ‘Can I change from an IVA to a debt management plan?’

There are several key reasons why you might want to switch between an IVA or debt management plan. Keep reading, to find out more.

Individual Voluntary Arrangement (IVA) or Debt Management Plan?

If you’re struggling to pay your bills, it’s important to consider all of the financial options available to you. Two of the most common choices are between an IVA or debt management plan.

Let’s look at these in more detail.

Individual Voluntary Arrangement (IVA)

An individual voluntary arrangement is a formal agreement that’s made between you and your creditors when you can no longer pay your debts in full. An IVA typically results in negotiated credit terms and the consolidation of multiple debts. You’ll pay back a certain amount each month to your creditors, with the IVA usually lasting five years. After this, major debts are often written off.

Debt Management Plan

Debt management plans are a different type of agreement, but one that’s also made between you and your creditors. They are similar to IVAs in that you’re renegotiating your debt, either by consolidating multiple debts into one more manageable plan, lowering interest rates, or reducing the amount of debt itself. The key difference is that a debt management plan is an informal agreement. It’s not legally binding, and while it often offers more flexibility than an IVA, there are also fewer legal protections once it’s in place.

What’s Better? An IVA or Debt Management Plan?

Deciding which type of agreement is best for you depends on your personal financial situation. Both have their advantages and disadvantages, and you’ll want to ask a financial advisor for their expertise before deciding or switching between one and the other.

An IVA is the preferred choice if you have a higher level of debt (usually over £6,000). If you don’t think you’ll be able to repay all of this debt, then an IVA often results in any excess debt being wiped out at the end of the five-year term. With an IVA, you’re also protected from creditors chasing you for repayments.

Debt management plans are a better option for lower levels of debt, or when you believe you can pay it all back. There’s no time limit to a debt management plan, it’s much less formal than an IVA, and the terms can easily be renegotiated.

Can I Change from an IVA to a Debt Management Plan?

The good news is that it’s perfectly possible to change from an IVA to a debt management plan. If you feel that you’ve made the wrong decision or if your financial situation has changed, then you may be considering making the switch.

The main reason why you might want to change from an IVA to debt management plan is that your income has increased. If this happens, then with an IVA your payments are likely to increase, and you could even end up paying back more than you originally accounted for.

You may also prefer the flexibility of a debt management plan if your income is likely to change again in the future. You have more control over your repayments and could even pay everything back in full if you come into a large sum of money. But as the agreement isn’t legally binding, creditors also have more power to seize assets in lieu of debts if you struggle to repay them again in the future.

However, if your financial situation has become more secure, then you may wish to make the switch from IVA to debt management plan. To do this, you first need to contact your financial advisor (or the official in charge of your IVA) and explain why you wish to make the change. If you have a good reason, there’s no reason why you shouldn’t be able to switch.

Contact Irwin Insolvency Today for More Information on IVA and Debt Management

If you’re wondering if you can change from an IVA to a debt management plan, then Irwin Insolvency’s expert team has the answers. Our experienced financial advisors can help you with expert debt advice and we’re ready to help today.

Contact Irwin Insolvency for more information on IVA or debt management plans.

Contact Irwin Insolvency today for your free consultation

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0800 254 5122

About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency,
 rescue and turnaround.