An Individual Voluntary Arrangement (IVA) is only available to individuals in debt; however, what happens when you and your partner want to deal with your debts together? Can you apply for a joint IVA?
A Joint IVA technically doesn’t exist; interlocking IVAs are similar and available.
So, what are interlocking IVAs? How does the application process work if you and your partner combine your debts into one IVA? How will this affect you both in the future?
Please read our guide as we explore this possibility.
Want to know more about IVA? Please read all about it in our detailed IVA guide.
Can I get a joint IVA?
As an IVA relates to an individual, you generally can’t get an IVA in joint names; instead, when people talk about joint IVAs, they are referring to ‘interlocking IVAs’.
What are interlocking IVAs?
Interlocking IVAs are IVAs which are joined together in one linked IVA which can be handled as one.
For example, if two people are financially linked, it may be better for them to propose an IVA to their sole or joint creditors.
This will require two IVA proposals to be written. If they are proposed simultaneously by the Insolvency Practitioner, they are referred to as an interlocking IVA.
IVAs can also be described as interlocking when both of you address the same debt that you and your partner jointly own.
What are joint debts, and how does it affect an interlocking IVA?
A joint debt is a debt in which two or more people have signed a credit agreement together.
Loans such as mortgage debts, personal loans and overdrafts all fall into the same category; however, often, people get confused that credit cards are also included in this category.
Credit card debts are not joint debts. It is the primary cardholder that is liable for the debt. UK credit cards have primary and secondary cardholders.
If both you and your partner have a joint debt and decide to enter into an interlocking IVAs, then those debts can be included in both your IVAs.
What happens if I enter into an IVA with my joint debt, but my partner doesn’t?
Joint debts are the responsibility of both parties, so if you enter into an IVA agreement with your joint debt and your partner decides not to, you will be given the protection of creditors with your IVA, but your partner won’t.
This will mean that your partner will still need to continue making payments towards their debts, and if they fail to do so, creditors will start charging interest, threatening them with court action and even making them bankrupt.
Get advice from your insolvency practitioner regarding this and weigh the options with your partner on whether an interlocking IVA would be the best solution for them.
Are you responsible for your spouse’s debt? Find out more.
What are the benefits of an interlocking IVA?
There are several benefits to IVAs. Find out more about whether an IVA is right for you. However, interlocking IVAs have additional advantages:
- You and your partner can make one monthly payment to your creditors.
- It will take into consideration joint expenditure, income and assets
However, remember if your partner’s or your proposal is rejected, then that would mean you won’t be able to proceed with the IVA.
Read our FAQs about IVAs.
How do interlocking IVAs work?
After picking the right IVA company, you will need advice from an approved Insolvency Practitioner (IP).
They will then create a proposal for you which they will offer to your creditors. However, before doing so, they will need to calculate your financials.
With an IVA, they will look at your current situation and work out how much you could pay towards your debts.
Here is how things get a little more complicated when you have joint living costs and debts. Your IP will be able to work this all out for you; however, to give you an idea, the proposal will work out how much debt each person can afford.
This will mean that the person who owes the most will pay toward the overall monthly payment for the IVA.
How does the interlocking IVA process work?
Apart from a few things, such as calculating your proposed monthly payments depending on your partners and your income and expenditure, the application process is the same when applying for a normal IVA.
If you are not aware of the process, then take a look at the steps below to familiarise yourself with the process:
- Talk financials with your IP
This would mean talking about how much you can afford. An excellent place to start would be to create your budget. Download our handy budget planner to see what your income and expenditure are.
Your IP will also go through a budget with you, but it is essential to be prepared. Collating your financial information will also give you a clearer picture of your income and expenditure.
After looking at your budget, your IP will be able to work out an affordable monthly payment which would need to be approved by your credited.
- Create an IVA proposal
So, an IP can formalise the process and draw up a proposal. The proposal will give details of what would be an acceptable monthly payment.
- A proposal is sent to the creditors
The proposal is sent to each creditor or company you have debts with. The creditors will be given time to respond to any queries regarding the IVA.
- Invitation to a creditors meeting
Your IP will invite you and your creditors to a ‘creditors meeting’. Usually, this is just a formality, and you don’t have to attend the meeting, and most of the time, your creditors don’t need to participate in the meeting.
- IVA approval
If there are no issues with the proposal and your creditors are happy with the payment proposal, then your IVA will be set up, and your IP can interlock the two IVAs. If, however, one of the IVAs is rejected, then IVAs will not be able to be linked.
What happens if I separate from my partner while in an interlocking IVA?
As an IVA is scheduled to last for five years, this can often mean changes can happen in a relationship. During the five years, you may decide to separate from your partner.
What happens to your interlocking IVA depends on the severity of the breakup. If it was a mutual agreement between the two-party and there is no animosity, then there should be no problem if you want to continue the current IVA.
However, the cases of a breakup often do not end well, so your Insolvency Practitioner may consider splitting the joint or interlocking IVA into their individual voluntary arrangements.
If you decide to do this, you might be worried that splitting up the IVAs would mean starting from the beginning. However, rest assured that it will not impact the IVA’s progress. The IVA will proceed from where you are.
It is crucial to speak to your Insolvency Practitioner and come up with the best solution.
Are there other debt solutions available to me apart from IVA?
IVAs have their benefits but also do have their drawbacks. It is essential to research and understand whether this is the right solution for you.
There are other debt solutions available such as Debt Management Plans (DMP), Debt Relief Orders (DRO) or even Bankruptcy. Read our debt plan pages to find out more about these.
