As you know, an IVA stands for an Individual Voluntary Arrangement. So, as the name suggests, an IVA pertains to a single individual, not multiple people.
So, while joint IVAs don’t technically exist. You can still apply for something called “interlocking IVAs” if you have a joint debt (or joint debts) with someone.
In this post, I’ll be discussing what your IVA will look like if you have a joint debt with someone and whether an IVA is even suitable for you or not if you have such a debt (or debts).
Is it Possible to get a Joint IVA?
As I mentioned earlier, IVAs can only be taken out and put in place with respect to individuals. Multiple people cannot take out a “joint” IVA.
It’s extremely important that when you’re considering an IVA, you take into account how that IVA is going to affect your life.
Remember that an IVA will have a severe impact on your credit score and may even affect your job as well as your home (you may have to get a remortgage if you have equity in your home).
You should also consider whether an IVA is the best debt solution for the type of debts that you have.
How do Interlocking IVAs Work?
Interlocking IVAs are actually what most people are referring to when they talk about “joint” IVAs.
This is when two people, for example, a husband and a wife, have two separate IVAs. IVAs are typically described as “interlocking” when one of the IVAs is dependent on the other.
IVAs can also be described as interlocking when both of them are addressing the same debt that is jointly owned by the two debtors.
That being said, even if you and your partner jointly owe money, both of you have to apply for your own separate IVAs individually.
Interlocking IVAs may also have a condition where both you and your partner both make one joint payment between both of you each month. This will ensure that your joint debt is being addressed and will also ensure that both of your payments are affordable to each of you and in accordance with what you’re earning for your household.
A joint debt refers to when two or more people have obtained credit by signing up for a credit agreement together. This can refer to many different types of loans such as mortgages, personal loans and overdrafts that have occurred on joint bank accounts.
It’s important to note that debts owed due to credit cards can never be categorised as joint debt. This is because the primary cardholder is the sole person who is responsible for the outstanding balance on a credit card.
It’s important to note that this is the case even if a second cardholder exists. The primary cardholder is the sole person responsible for the outstanding balance even if the secondary cardholder is the one doing the spending.
Joint Debts, IVA and Marriage
If both you and your partner have a joint debt (or joint debts) and decide to enter into interlocking IVAs individually, then those debts will be included in both of your IVAs.
As a result, both you and your partner will be making payments towards the joint debt until the agreed-upon duration of both your IVAs ends.
What if I Enter into an IVA for a Joint Debt but My Partner does not?
If you have a joint debt with someone and decide to enter into an IVA, then your debt partner will still be responsible for making payments towards the debt.
Your partner will not be given protection from creditors in the way that an IVA provides you protection. They will keep having to make payments with creditors charging interest and threatening to make them bankrupt.
If you get a portion of the joint debt written off for yourself through your IVA, your partner will still be asked by your creditors to pay the remaining debt off in full and mind you that the creditors would be fully within their rights to do this.
This is because both parties are severally liable for the debt until the debt has been paid off in full. You’ll only get the debt written off for yourself when you enter into an IVA, not for your debt partner.
Thus, if you are considering entering into an IVA to get ride of your joint debt, it’s a good idea to consider what kind of effect it’s going to have on your debt partner.
Maybe you could ask them to consider their options. It would definitely be beneficial if you could get them to apply for an interlocking IVA with you. Convincing them to get an interlocking IVA with you would cause both of you to make your monthly payments much more affordable.
Not to mention that getting an interlocking IVA would cause not only you but also the person you jointly owe the debt with to reduce the amount of money they owe drastically.
It’s very important when choosing a debt solution that you obtain debt advice from as many different sources as possible. There are a number of debt solutions available to you and it’s important that you choose the one best suited for your circumstances.
When choosing a debt solution, you can seek debt advice from independent charities such as National Debtline or Payplan. They are authorised and regulated by the Financial Conduct Authority (FCA) and they have professionals that will analyse your situation and determine what the best debt solution for you would be.
Additionally, if you are indeed considering to enter into an Individual Voluntary Arrangement for a joint debt, do consider the effect it’s going to have on the person who shares this burden with you.
If you’re unsure about what effects it’s going to have on them, it can be worthwhile to ask your Insolvency Practitioner for more information on this.
Finally, I’d like to address the fact that while it definitely can be a good idea to suggest an interlocking IVA to the person you share the debt, you must also consider the possibility that maybe an IVA might not be the best option for them.
Of course, it’s entirely possible that their financial circumstances might be entirely different from yours and while an IVA may be suitable for you, that may not be the case for them.
In the end, I just have to say that if both you and the person you share the debt with can get an interlocking IVA each, then that’s great.
However, if your partner can’t, you should at least inform them that you’re entering into an IVA and they should start looking at debt solutions as well. This is because their burden is going to increase once you get your debts written off using your IVA.
While a joint IVA is essentially a myth, an interlocking IVA is something that does exist and is something that definitely should be taken advantage of.
I hope you found this information useful. Let me know if you have any further questions.