Will an IVA affect my partner?

In England and Wales, an Individual Voluntary Arrangement (IVA) is a popular debt solution that can help you clear your unsecured debts through a series of monthly IVA payments that are affordable for you. The typical IVA term lasts five years but can be extended to six years if you miss a payment or have a payment break.

But before you agree to enter into an IVA, it is important to do your research and find out as much as you can about what the next five years are likely to look like for you. This includes the impact your IVA may have on those closest to you, like a partner or spouse.

In this guide, we’ll explain how your IVA could affect your partner whether you are in an individual or joint arrangement.

Can I get a joint IVA with my partner?

Unlike some other debt solutions, IVAs are designed to help individuals manage their personal debts. Because of this, it isn’t possible to get a joint IVA for joint debts with your partner.

It is, however, possible to enter into what is known as an interlocking IVA which is when two separate IVAs are administered but paid through the same monthly payment. This can be a suitable option when you or your partner’s personal debt levels are too low for separate IVAs.

It is also possible for a joint loan to be included in a personal IVA but when this happens, both people will still be responsible for paying it off. This means that, after you write off a portion of the debt during your IVA, the other person will become responsible for paying the remaining debt.

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Does my partner have to contribute to my IVA?

Regardless of whether the debt belongs to you and your partner or just you alone, you will be solely responsible for making the monthly payments on your IVA and your partner wont be expected to contribute a penny.

However, if you enter into an interlocking IVA, your partner will be expected to contribute to the monthly payments for the duration of the arrangement if it is to stand any chance of success.

It is also worth nothing that if you were to seperate from your partner in the middle of an interlocking IVA, the entire arrangement may fail but you will still be expected to repay the remaining balance. This is why you should always thing about the long-term impact of the debt solution you are entering into before deciding to go ahead with it.

Will my partner become responsible for household bills when I enter an IVA?

When you enter into an IVA, your monthly payments will always be based on what you can comfortably afford and, if you live with a partner, a household income and expenditure assessment will be carried out to determine this. When this has been done, the total household expenses for you and your partner will be deducted from your total monthly income.

Because it is calculated this way, you should always be able to afford both day-to-day and monthly expenses before your monthly IVA payment is taken into account and there is no need for your partner to take on the role of covering household bills.

The only time your partner may be required to pay more than you for household bills is if they earn more than you but this will be determined during the household income and expenditure assessment and clearly explained to both of you before you start making payments.

Will my partner’s credit be affected by my IVA?

In the past, credit reference agencies automatically created a financial association between people that lived at the same address. This, essentially, meant that if your spouse had a poor credit rating, yours was also affected. Thankfully, this is no longer the case.

When you enter an IVA, it will be noted on your credit file for a total of six years from the date it was approved. This will lower your credit rating and make it harder for you to obtain credit.

The only way it will affect your partner’s credit is if you and your partner have joint financial accounts

This could include a joint bank account, or if your IVA includes joint debts that you both owe such as a joint loan or overdraft. Because this creates a financial link between you and your partner, their credit will also be affected by your IVA.

Do I have to inform my partner of my IVA?

Legally, you are not required to inform your partner or spouse of your IVA and they won’t be given any information about your arrangement by a third party. However, being upfront about your finances can make the IVA process much easier for you.

When you enter an IVA, your Insolvency Practitioner (IP) may also ask for a detailed outline of your total household expenses and this can be easier with the help of a partner.

It can be daunting to broach the subject of debt with a partner – especially if they are blind to your debt problems – but being open and honest about your finances can help you feel supported during what can be a difficult time.

Will the home I own with my partner be affected by my IVA?

If you are the sole owner of your home, you may need to release equity from your property as part of your IVA arrangement. However, if your home is jointly owned by you and your partner, there will be implications for both of you and 100% of your property will become available to the arrangement.

This is why you must clearly explain the terms of your arrangement to your partner before you agree to any form of debt relief. It may not feel like an important factor at the time but it can prevent a situation down the line where they refuse to allow you to release equity and your IVA fails.

Do I need to remortgage my property to settle my IVA early?

If you own your home, you don’t have to wait until the fifth year of your IVA to release equity and can remortgage at an earlier date to settle your arrangement sooner.

This is usually only an option if a third party can provide a lump sum payment but if you can remortgage your home, this money can also go towards your IVA.

However, you must do your research before deciding to remortgage and only do so if you have explicitly stated that you will be using the money to settle your IVA early. If you fail to disclose this information, any funds released from the remortgaging of your home may be treated as a windfall payment and you could lose them altogether.