Having debt with another person can be complicated – especially if you’re married or share a home – and you may be wondering if you can combine your debts to make it easier for everyone involved.
However, while it may not be an option to get a ‘joint IVA’, you can get an interlocking IVA with a partner or spouse, making it easier to deal with your joint debts and manage your household finances.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal debt solution designed to help you repay your unsecured debts (e.g. personal loans, national insurance arrears, and benefit overpayments debts) through a series of monthly payments based on what you can afford. Most IVAs last five years, but you may be able to complete yours sooner by proposing a lump sum payment.
During an IVA, all interest and fees are frozen and your creditors won’t be able to contact you or ask for payment. This is to allow you to repay your debt over a reasonable period without your balance increasing or being harassed by the people you owe money to.
Most secured loans can’t be included in an IVA. This includes mortgages, car loans, and business loans.
IVAs must be prepared by an Insolvency Practitioner (IP) licensed by the Insolvency Service. They will work out how much you can realistically afford to pay towards your debt, help you create an IVA proposal, and distribute your monthly payments among your creditors.
Once you’ve made your final IVA payment and exited your arrangement, any remaining debt will be written off and you’ll be free to move on with your life if you don’t have any other debts.
How much debt do you have?
What is joint debt?
Joint debt is exactly what it sounds like – a debt you’re liable for alongside another person due to entering into a joint credit agreement together (e.g. a mortgage or bank loan) and failing to keep up with the repayments. Because it is most common among married couples, it’s often referred to as ‘matrimonial debt’.
Both parties are equally responsible for repaying 100% of a joint debt in the eyes of the law under something called ‘joint and several liability’. So even if only one person spent the money, both parties can be pursued for payment of the total amount borrowed.
Is a joint IVA possible?
Because an IVA is designed for individual debts, it’s not possible to get a joint IVA.
However, it is possible to get something called an ‘interlocking IVA’, which is essentially when separate IVAs are authorised together and their repayment schedules are merged into a single monthly payment. During an interlocking IVA, a couple will only be charged one set of fees as opposed to two.
The main aim of an interlocking IVA is to consolidate two monthly payments into one. This can make it easier to manage household finances but it doesn’t mean that either person becomes responsible for the other’s debt and you will remain responsible for your debt only.
Furthermore, an interlocking IVA must be approved by creditors on both sides and there is a risk that one person could interfere with the success of the other person’s arrangement. Because they are still separate IVAs, they must also be applied for by each person individually before asking your IP to link them.
Do you have to be a couple to get an interlocking IVA?
Despite most interlocking IVAs being taken out by couples, it’s not a legal requirement to be in a romantic relationship with the other person.
The only requirement is that you live with the other person and you are financially connected to them in some way. This means that, technically, you can apply for an interlocking IVA with a partner, spouse, civil partner, or even a child that you have joint debts or bank accounts with.
Before applying for an interlocking IVA, you must ensure that you are eligible by having at least two different creditors and enough disposable income to make monthly payments towards your debt – most creditors won’t accept less than £100 a month.
There is no minimum debt level required for an IVA but another debt solution may be better suited if you have a relatively low debt level (e.g. less than £7,000).
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Can joint debts be included in an IVA?
IVAs are designed for individual debts and because you’ll be expected to include all of your unsecured debts, joint debts can be included.
However, the issue with this is that an IVA only protects the person who entered the arrangement, not the other person listed on the joint credit agreement. Therefore, the other person will still be responsible for the payment of the debt and will be liable for the portion not written off by the IVA.
This also means that the creditor can still pursue the other person for payment and, in some cases, may take further action against them if they refuse to cooperate.
How will my partner be affected by my IVA?
Remember, an IVA only affects the person who applied for the IVA so any other close family members, including a partner, spouse, or child, won’t be affected in any way.
The only time a partner will be affected by an IVA is if they are also listed on any of the included debts (e.g. joint debts) as they may still be chased for payment of the IVA debts.
Put simply, if 100% of the debts included in your IVA are in your name and your name only, your IVA will have no impact on your partner or their credit.
This also means that you’re not legally required to tell your partner that you have an IVA if you don’t want to. They can still search for your name on the Individual Insolvency Register (IIR) but they are unlikely to know about the existence of an IVA unless you tell them personally.
Hiding an IVA from a partner or spouse is not recommended and they’ll find out if you were to apply for a mortgage within six years of starting your IVA. Being open and upfront with a partner or spouse about your financial situation can also make it easier to navigate the IVA process.
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From writing off a large portion of your debt, to readjusting your budget, we’ll find a solution that suits you.
What are the benefits of an interlocking IVA?
Like all debt solutions, you must weigh up the advantages and disadvantages of an IVA before agreeing to anything.
We’ve outlined the benefits of an interlocking IVA below so you can make an informed decision:
You can reduce your household expenditure
The biggest advantage of an interlocking IVA is the ability to reduce your household expenditure.
However, it’s worth noting that although two payments will be merged into one and you’ll only need to pay one set of fees instead of two, the amount of debt owed by both parties won’t change.
You can deal with your debts together
Having joint debt can be stressful, but tackling it together can allow you to improve your finances as a couple and work towards a healthier financial future – especially if you live together and have plans to buy a home or start a business.
Simply understanding with the other person is going through can also make it easier to deal with debt.
You’ll both be protected from legal action
Once your interlocking IVA has been approved, none of your – or your partner’s – creditors can get in touch with you or take any further action against you to get you to repay the debt.
This can allow you to focus on making a single monthly payment towards your joint debt without the added stress of being contacted or harassed by the people you owe money to.
Is an interlocking IVA a good idea?
Whether an interlocking IVA is a good idea depends on your own personal circumstances. Like all debt solutions, just because it’s the right option for someone else, it doesn’t automatically mean it’s the right choice for you.
When you apply for an interlocking IVA, your IP will assess your situation and determine whether it’s a good idea based on the information provided.
Generally, an interlocking IVA can be useful if you and your partner have joint debts that you’re struggling to pay and have various other financial obligations, such as mortgage payments and utility bills.
Conclusion
There is no such thing as a joint IVA but an interlocking IVA can allow you to merge your IVA with a partner or spouse’s IVA to streamline your household finances.
The eligibility criteria for an interlocking IVA is similar to the eligibility criteria for a standard IVA and both creditors must approve it for it to go ahead.
Whether you’re considering an interlocking IVA or you and your partner are struggling with separate IVA payments, don’t hesitate to reach out for expert debt advice and support.
