Having joint debts can be complicated – especially if you’re married to the other person and share joint assets with them. However, there are solutions that can help you deal with joint debts, allowing both of you to make a fresh financial start.
An IVA is one of the most common debt solutions available in England, Wales, and Northern Ireland. It’s not possible to get a joint IVA, but you can include joint debts in an IVA or enter into an interlocking IVA alongside a partner or spouse.
What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement (IVA) is a formal debt solution designed to help you repay your unsecured debt through a series of monthly payments based on what you can afford.
Examples of unsecured debts include national insurance arrears, benefit overpayments, debts to family and friends, personal loans, and any other outstanding bills (e.g. solicitor’s costs). Most secured loans can’t be included in an IVA. This includes mortgages, car loans, and business loans.
Most IVAs last five years, but they can be completed sooner if you pay off the debt with a lump sum or later if you have a payment break or reduction.
During an IVA, all interest and fees will be frozen and the people you owe money to (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 additional costs or repeated calls.
IVAs must be prepared and managed by an Insolvency Practitioner (IP) authorised and regulated by the Insolvency Service. They will work out how much you can realistically afford to repay, help you create your IVA proposal, and distribute your monthly payments among your creditors.
Once you’ve made your final IVA payment, any remaining debt will be written off and you’ll be free to move on with your life. This means you’ll never be contacted about the debt again and won’t have to pay anything else towards it.
How much debt do you have?
What is joint debt?
Joint debt is another word for combined debt. In other words, it’s a debt you’re liable for alongside another person because you’ve entered into a joint credit agreement with them and you’ve both failed to keep up with your repayments.
Examples of joint debts include a personal loan, bank account, or mortgage on a jointly owned property.
It’s a common misconception that repayments on a joint debt are split 50/50. However, both you and the other person are equally liable for repaying the full debt under something called ‘joint and several liability’. This means that you’re both equally responsible for the entire amount borrowed – even if the other person stops paying.
Some people in joint credit agreements agree to split payments 50/50, but you could also split it 60/40, 90/10, or even 100/0 if you wish – even if only one person spent the money. The only thing that matters is that the lender receives 100% of the amount borrowed.
Can you have a joint IVA?
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 when two separate IVAs are set up together and their repayment schedules are merged into a single monthly payment.
During an interlocking IVA, a couple will also 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 will become responsible for the other person’s debt as you will still remain responsible for your debt only.
Because they are still separate IVAs, they must 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. There is no minimum payment required for an IVA, but most creditors won’t accept less than £100 a month.
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Can joint debts be included in an IVA?
Because you’ll be expected to include all of your unsecured debts in an IVA, 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, if one partner enters an IVA, the other person will still be responsible for the rest of the money owed and will be liable for the portion not written off by the arrangement.
This means that the lender of the joint loan will be repaid from two sources: your IVA payments and payments from the other person listed on the credit agreement. The creditor can still pursue the other person for payment and can take further action against them if they refuse to cooperate.
Will my IVA affect my partner?
An IVA only affects the person who applied for the IVA, so any other close family members, including a partner, spouse, or child, shouldn’t be affected in any way.
The only time a partner will be affected by your IVA debts is if they are also listed on any of the joint debts included as they will likely still be chased for payment.
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 finances.
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.
However, 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 about your financial situation can ease some of the pressure and 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 some of the main benefits of an interlocking IVA below so you can make an informed decision:
Better manage your household finances
The biggest advantage of an interlocking IVA is the ability to better manage your household finances. With just one monthly instalment instead of two, you’re less likely to forget to make a payment.
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 what the other person is going through can also make it easier to navigate the debt repayment process.
You’ll both be protected from legal action
Once your interlocking IVA has been approved, none of your – or the other 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 dealing with your debt without the added stress of being repeatedly contacted by the people you owe.
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 in a similar situation, it doesn’t automatically mean it’s the right choice for you.
When you apply for an interlocking IVA, your IP will assess your income and debts and determine whether it’s a good idea based on the information provided.
Generally, an interlocking IVA will be suitable if you and your partner have joint debts that you’re struggling to pay and have various other financial obligations, such as a mortgage 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 as you’ll still need to submit an individual application.
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.
