IVA definition and what it means for you
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Starting an IVA can sometimes affect your partner. Make sure you understand the possible impact on their finances.
At Debt Advisory Centre, we understand how stressful having problem debt can be. And if you’ve just started looking into the different debt solutions you probably have a million questions about how they work and the effect they can have on your life.
Well, we want to make the process of tackling your debts as easy as possible by taking on one question at a time and breaking things down. Today, we’re going to look at Individual Voluntary Arrangements (IVAs) and, specifically, whether starting this solution could affect your partner.
What is an IVA?
An IVA is a formal debt solution to deal with insolvency. It may be an appropriate option for you if you can’t keep up with the contractual payments you agreed to when you took the credit out.
With an IVA, you would agree a new monthly payment with your creditors – one that meant you could afford all your other essential outgoings as well. You’d pay this single lower amount for five to six years and, after this time, if everything has gone according to plan, the rest of your unsecured debts on the IVA would be written off.
Can an IVA affect my partner?
In short, the answer is ‘yes’ - your IVA can affect your partner, but whether it does or not and how much it effects them, just depends on your circumstances. Let’s have a look at some key questions:
Will my partner have to contribute to my IVA?
‘No’ is the answer to this question. An IVA is meant to be for the individual, as the name suggests, and your partner would never be expected to put their own money towards paying off your debts, even if you’re married and living together.
Having said, if you live together and your partner is bringing money into the household, your creditors will expect them to contribute towards the household costs so that you have more available to put towards your IVA payments.
Will I still be able to contribute to the household if I start an IVA?
Thankfully, the answer here is ‘yes’. When you first look into an IVA, a debt advisor will take you through your income and expenditure. They do this to work out what you have left once you’ve paid all your essential bills.
Allowances are always made for you to contribute to essential household costs, so your partner won’t ever be left paying all the other bills by themselves because of your IVA.
Will my IVA affect my partner’s credit history?
The answer here is ‘sometimes’. An IVA would have an impact on your credit history for six years from the date that it started and any potential lenders would be able to see you have not maintained your contractual payments. This means they may be less likely to lend to you, or that they will only lend to you at a higher rate of interest.
It’s possible that your IVA will have an effect on your partner’s credit history as well if you have any joint financial accounts. There is sometimes a way around this if you apply for a Notice of Disassociation. This breaks the financial link between two people, but would only work if you don’t have any active finances together – for instance, a bank account that you’re both still using, a loan that isn’t paid off or a joint mortgage.
Can I have a joint IVA?
Technically, there is no such thing as a joint IVA but it is possible to link two IVAs if both you and your partner have debts and live at the same address.
To arrange an IVA, you have to put something called a proposal together for your creditors that shows them your income, expenditure and how much you would be paying towards your debts on the IVA. You’d have to put forward a linked proposal if you wanted linked IVAs, and both would have to be approved for it to go ahead.
Going ahead with linked IVAs would mean that personal information about your debts as well as notes of the conversations you’ve had with your IVA provider would be available to your partner and you’d have access to theirs. You’d just need to make sure that you were OK with this before you went ahead.
What if I want an IVA but I have joint debts?
It is possible to go on an IVA if you have joint debts with someone, but when the debt is written off at the end of the IVA it would be written off for you and not your partner.
When you take out joint credit, you both become equally responsible for all of the debt – not half each. So, even if the debt is written off for you, the creditors would still chase the other person named on the agreement for the outstanding amount.
Do I have to tell my partner about my IVA?
There’s nothing in an IVA agreement that states you have to tell your partner about it. Realistically though, it may be better if you do.
Completing an IVA successfully means sticking to a budget and always making your payments. You will also need to maintain contact with your IVA provider by letter and telephone. It may prove difficult to do this over a five to six-year period without letting your other half know.
Be aware that whoever organises your IVA will need to know how much money there is coming into your household each month, including your partner’s earnings, so in most cases they will want to see a joint income and expenditure form. You will have to state what your partner earns on the proposal and for that to happen you partner needs to sign a consent form.
If you have joint debts with your partner, it’s possible they will find out about the IVA anyway through the lender. Lenders may contact your partner to ask them to make the contractual payments as you will no longer be doing so. So even if you hadn’t told your partner about the IVA, they would know that something significant had changed as you’ve stopped making your repayments.
The positive effects
While we’re talking about the possible effects an IVA could have on your partner, it’s important not to forget the positive impact it could have on both your lives.
If you’ve been feeling down and anxious about your debts for a while, that worry may have taken it’s toll on your outlook on life and your relationships. An IVA can, in some cases, make a real positive difference to your life and your partner’s life, as you’ll both know the debts are being taken care of.
An IVA will also allow you to work towards a date when you’ll be debt-free. If you have any big plans with your partner, like buying a house or saving to go traveling together, it can help to know when you debts will be dealt with so you can focus on your joint goals in life.
Get the help you need
Hopefully, this has answered the main questions you might have if you’re considering an IVA and in an relationship.
You can contact one of our debt advisors using the options on the left to find out whether an IVA is the right way forward for you. There’s also lots of free and impartial money advice available from the Money Advice Service.
by Christine WalshBack to blog home