A “joint IVA” is an option to consider if you and your partner are both concerned about unaffordable debt. While an IVA is fundamentally an individual debt solution, couples can arrange for their IVAs to be arranged, administered, and paid in a coordinated way.
An IVA itself is an alternative to bankruptcy that creates a legally binding agreement between you and your creditors. Individual voluntary arrangements are a type of personal insolvency, set up managed by a licensed insolvency practitioner. They typically run for a period of five years (or longer) with any remaining debt getting written-off at the end.
Linked IVA arrangements for a couple are known as an “interlocking IVA”. The monthly payment for this joint debt arrangement is calculated on a household basis, taking into account both of your incomes, bills, and other reasonable expenses.
You can arrange the set-up of an interlocking IVA jointly by sharing the same debt adviser. The continuing administration of an interlocking IVA (like annual reviews) is also handled jointly and you can make a single consolidated payment into your IVAs each month. The same adviser may also be able to arrange Breathing Space if you’re at risk of creditor legal action during the set-up phase.
It is not required that you have any joint debts in order to arrange an interlocking IVA. Your individual IVAs will deal with all of the qualifying debts that each of you owe. If you do have any joint debts, then each of you can discharge your personal liability for repayment when you complete your own IVA.
If you have a joint debt but only one of you enters an IVA the situation is different. When an IVA is completed, an individual is discharged from their personal liability for repayment of a joint debt. However, the other borrower remains liable to repay the full balance owed at the contractual rate of repayment.
An IVA is a type of personal insolvency, so it also takes your assets into account. This includes any assets that you jointly own, such as your home or a vehicle.
With a joint IVA, each of your share of the equity in your home is taken into account by your own arrangement. If just one of you enters an IVA, the process only takes into account the share of the equity owned by that individual.
Joint interlocking IVAs are generally used by cohabiting couples. This could include married couples, civil partners, and unmarried couples. There is actually no technical requirement to be engaged in a romantic relationship. Other persons who cohabit and who are financially interdependent could also potentially use an interlocking IVA together.
• Legal protection from creditors
• Avoiding bankruptcy
• Experts deal with your creditors for you
• Assets dealt with flexibly
• One affordable payment
• Unaffordable debt written-off
• Damage to your credit rating
• Creditor consent required
• Restricted discretionary spending
• Possible equity release for homeowners
• Requirement to hand over windfalls
• You’ll fall into arrears when your IVA begins
• Personal details published on a public register
• Risk of bankruptcy if your IVA fails
• Some types of employment affected
There is no rigid list of qualification criteria for an IVA. These arrangements are comparatively flexible by nature.
You’ll need to live in England, Wales, or Northern Ireland (or have emigrated overseas within the past three years). You must be able to afford to pay towards your debts, but be unable to afford the full contractual repayments.
You’ll also typically need to owe at least £5,000 (in total) to at least two separate creditors.
Your IVA will not necessarily fail if you separate during an interlocking debt solution. The individual nature of an IVA means that they can easily begin to be administered separately and each person can make their own separate payment.
The potential risk is that either (or both) of you become unable to make a regular payment. This is a potential issue as your total bills and expenses may increase if you move into separate households.
In the UK (excluding Scotland) the alternatives to an IVA include:
Debt management plans which enable people to repay their debts at a reduced rate they can afford. This repayment process continues until the debts have been cleared in full. It is possible to enter a joint debt management plan together with your partner. A DMP may last for a long period of time depending upon how much you owe and how fast you can afford to repay it.
A debt relief order is available if you owe £30,000 or less, you aren’t a homeowner, and you can afford to pay no more than £75 per month towards your debts. This debt solution cannot be entered jointly but couples can access it individually after each paying the £90 application fee.
Becoming bankrupt could be a faster and cheaper way to clear your debts than an IVA. It’s often used to address serious debt problems, but it sometimes deals with assets less flexibly than an IVA. This debt solution cannot be entered jointly but couples can access it individually after each paying the £680 application fee.
Debt consolidation might be viable if your credit rating is reasonable and you can genuinely afford the new consolidation loan payment. Consolidation loans can be accessed individually or jointly. This can be a risky way to address debts, in particular if the new loan is secured against your home.
Residents of Scotland have access to a separate range of debt solutions.
For confidential advice about IVAs and other debt management solutions please contact us.
Our qualified debt advisers offer a friendly and sympathetic approach to identifying ways to improve your personal finances.
Author: Andrew Graveson
Qualified Debt Adviser & Bright Oak’s Founder
Page Last Updated: 04/07/2021