Joint IVAs
An IVA is an Individual Voluntary Arrangement. As the name suggests, it is an individual debt solution, so joint IVAs are a bit of a myth.
What people usually mean when referring to joint IVAs is ‘interlocking IVAs’. That’s when – for example – both a husband and wife have two separate IVAs. In a case like this, their IVAs might be described as ‘interlocking’, especially if one is dependent on the other.
Entering an IVA is very much a separate process, and each person must apply for their own IVA individually.
Joint debts
Joint debt is another term sometimes that is sometimes used incorrectly. A joint debt is where two or more people have signed up for a credit agreement together. This might include mortgages, loans or overdrafts on joint bank accounts.
However, credit card debts are never joint debts – because with a credit card there is only ever one primary cardholder, and they are individually responsible for the debt.
This is the case even if there is a second cardholder on the account – the primary cardholder is solely responsible for all the debt – even for spend made by the second cardholder.
In the event of a joint debt, if one partner enters an IVA, the other partner will become liable to repay the full debt as both parties are joint and severally liable for the debt until it is paid in full.
How does your IVA affect your partner?
Your partner’s income
When voting on whether or not to accept your IVA proposal, your creditors will expect to see an income & expenditure summary for your whole household.
This doesn’t mean that your partner will necessarily be expected to contribute towards repaying your own individual debts. It’s just that your creditors will want to be sure that your partner is paying a fair share of the household bills, and you are not subsidising your partner’s outgoings to the detriment of your creditors.
Creditors can’t insist on seeing proof of your partner’s income, or any details about your partner’s expenditure. As long as your partner is paying a fair share of the total household outgoings – relative to their income – your creditors won’t normally ask for any of your partner’s surplus to be paid into your IVA.
Your partner’s assets
If you have any joint assets with your partner – for example, a home or other property that you jointly own – you will need to disclose this to your creditors.
However, your creditors can’t ask for your partner’s share of any joint assets to be released and paid into your IVA.
If you own your home – or any other property for that matter – your creditors will ask you to try to release a portion of any equity you have in the property and pay it into your IVA. This normally happens in the final year of your IVA. If you jointly own the property, you will only be asked to try to release a portion of your share of any equity.
However, with any jointly-owned property, your partner would have to agree to – and be jointly responsible for – any re-mortgage or secured loan you take out to release your share of the equity.
If your partner refuses to agree to this, you won’t be able to release the equity via any form of lending secured against the property (re-mortgage, equity release, secured loan, etc.). In this case, you may need to do something else to compensate your creditors for the equity they can’t get hold of.
You may be offered the alternative of asking a 3rd party (for example, a partner, friend or family member) to pay an amount into your IVA equivalent to 85% of your share of the equity.
Or your IVA may be extended by up to 12 months beyond the original planned end date, making up to 12 additional monthly IVA payments into your IVA before it is completed.
*In the case of a one-off lump sum settlement