There’s plenty of information available about getting an Individual Voluntary Arrangement (IVA) – but if you and your partner are both facing debt, it can be trickier to find good information about what’s involved with a joint IVA.
With this in mind, we’ve put together a detailed guide that’ll walk you through everything you need to know about joint IVAs.
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What is a joint Individual Voluntary Arrangement (IVA)?
Joint IVAs can seem a little confusing at first glance – because there’s lots of information online that will tell you that you can’t apply for an IVA in joint names.
Strictly speaking, this is true. To get a joint IVA, you and the other person involved will need to apply separately. However, when the IVAs are set up, they can then be linked together.
The whole thing then becomes known as an ‘interlocking IVA’. Although it’s normally couples that get a joint IVA, people don’t necessarily have joint bank accounts – or be partners or in a relationship.
When your approved IVAs are joined together into one interlocking IVA, they can be handled as one. The same insolvency practitioner (the company that you need to set your IVAs up) will be able to handle everything for you – with one payment and combined paperwork.
With this in mind, you can probably understand why it’s a good idea that couples deal with the same insolvency practitioner (IP) as each other. This keeps things much simpler.
IVAs are a formal debt solution
When you look for debt advice, you’ll often see joint arrangements talked about as a ‘formal debt solution’. This really just means that it’s agreed legally by everyone involved. This is good news – because it means that if the companies you have debts with agree to it, they can’t back out further down the line.
Of course, it also means you and your partner can’t back out when the IVA is in force too – so it’s absolutely essential that you talk about your debt concerns with an insolvency service that can offer professional debt advice.
How do interlocking IVAs work?
As you can probably tell, setting up an interlocking IVA for joint debts is a little more complicated than getting an IVA for an individual person – but we keep things as simple as possible.
When you set up an IVA, the IP that’s helping you puts together something called a ‘proposal’. A proposal is an offer to each of your creditors (the people or companies you owe money to) – and it’s based on the IP looking at your situation and working out how much you can afford to pay towards your joint debts. This will usually be a monthly payment – but can sometimes be a lump sum if you have it available.
However, when you have joint debts and joint living costs, things are slightly trickier to calculate – but we do it all the time, so we keep things straightforward.
The proposal for each person will work out how much of each debt they can afford to pay – as well as how much of their income goes towards living expenses. This usually means the person who earns the most will pay more towards the overall monthly payment for the IVA.
The IVA application process
Although an interlocking IVA for joint debts means a few more calculations for the IP that’s supporting you, most of the actual IVA application process is the same as applying for a standard IVA.
You’ll start by talking to your IP about your finances. These conversations are completely confidential – and the person you talk to will use the information you provide to get an idea of what you owe, what you earn, and your living costs.
With this information, the IP works out exactly how much of your monthly payment should be paid to each of your creditors. This information goes into the proposal – and is then sent to each of the companies you have debts with.
After being sent the proposals, the companies you have debts with are given time to respond, then invited to a ‘creditors meeting’. You don’t have to attend this meeting – and most of the time, your creditors won’t either. Assuming they don’t have any issues with what your IP is offering – or if they don’t respond at all – then your IVA will be set up.
Of course, your creditors might not agree – but this is fairly rare. If they’re one of the main companies you have debts with, disagreeing might mean the IVA can’t go through – but more often than not, your IP will find a way forward. If a creditors objects but is only owed a small proportion of the debt, the IVA will go ahead anyway.
What happens if an IVA proposal is rejected?
Since your IVA proposals are put together with a view to becoming a single, interlocking IVA, it means that if one of the proposals is rejected, the whole joint IVA will fail.
Again, try not to worry about this too much at this stage. An experienced IP will know what is likely to be approved or not, so they’ll aim to make the proposals as attractive as possible for your creditors.
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Are you eligible for interlocking IVAs?
To qualify for a joint IVA, you and your partner will need to:
- Have debts with at least two separate creditors
- Have a total debt of more than £6,000
- Enough money to make a payment towards your debts each month
What kind of debt can be included?
IVAs are debt solutions designed to help people with unsecured joint debts. This includes the following:
- Personal loans
- Jointly owned credit cards and individual credit card debts
- Council tax debt
- Payday loan debt
- Outstanding bIlls
- Income tax debt
- Debt owed to family or friends
- Catalogue or store card debt
- Energy and water bill debt
- Tax credit debt or benefits overpayments
What kind of debt can't be included in interlocking IVAs?
Secured joint debts that you or your partner can’t include in an IVA are:
- Mortgage debt
- Other secured loans
- Hire purchase agreements
- Student loans
- Child support debt
- Social fund loans
- Debt incurred through fraud
- Court fines
- TV licence debt
Joint IVA pros and cons
Like all debt solutions, joint individual voluntary arrangements have some advantages and disadvantages.
There’s no substitute for getting good debt advice from a company that’s authorised and regulated by the Financial Conduct Authority (FCA) – but it’s worth having a quick overview so you know what these are.
Advantages of an interlocking IVA
- There are no fees to pay upfront
- Even if some of your creditors vote against the IVA, it can still go through
- Creditors can’t get in touch with you or take any further action against you or your partner when the arrangement is approved
- All interest and charges are frozen
- You’ll only make one affordable payment each month
- If your circumstances change, you could talk to your IP about some flexibility with your payment
- If you’re a homeowner, you won’t be forced to sell your home (whether or not it’s jointly owned)
- Any debt that remains at the end of the joint IVA will be written off
Disadvantages of an interlocking IVA
- There are likely to be restrictions on your spending when you the arrangement is in place
- Not all debts can be included
- There’s a chance that your IVA may be rejected by your creditors
- If you’re a homeowner, you may have to release some of the equity tied up in your home
- If people come into money during the IVA, they may be expected to make a lump sum payment
- If you fail to make the agreed IVA payments, the arrangement could fail
- Because an IVA will mean you’re breaking your credit agreement with a lender, it will be recorded on your credit file and will affect your ability to get credit for six years
- Your arrangement will be recorded on a public register (although it’s unlikely anyone you know will see it)
- Some employers won’t allow you to keep your job if you’re ‘insolvent’ – and you can’t be the director of a limited company
Is a joint IVA the right debt solution for you?
A joint IVA can be an amazing way to write off a large percentage of what you owe – giving you the chance to start again with your finances.
However, you should remember that no one’s money situation is exactly the same as anyone else’s, so when it comes to getting on top of your debts and working towards becoming debt-free, it’s absolutely vital that you get free debt advice that’s specifically for you.
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