Could you confirm what the negative effects of an IVA would be, and how this compares to a Debt Management Plan (DMP)? For example, credit and black listing? I have approx £15,000 debts and earn £1,300 after tax. My direct debits come to £900 per month, approx £500 are debts. My rent is £550, so i'm sinking fast and know I need to find a solution quickly before it's too late.

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With an IVA or a Debt Management Plan, your credit rating will be affected as you will be breaking the terms of the agreements you have signed with your creditors.  However, if you are in the position where an IVA or a DMP is the right solution for you, it is highly likely that you are unable to meet the monthly contractual payments to your creditors and will at some point fall behind with them.  Thus, your credit rating is extremely likely to be affected anyway. You will be unable to borrow money on an unsecured basis while you are in an IVA or a DMP.  However, both solutions do demonstrate to your creditors and to potential future lenders that you are handling your situation responsibly and attempting to repay your debt.  In most cases, individuals are able to borrow again once their IVA or DMP is complete – usually at a smaller level.  As you make the contractual payments towards this smaller debt, your credit rating will improve over time.

If you would like to discuss IVAs or DMPs in more detail, please feel free to contact one of our advisors on 08000 192 095.