Joint Debts and an IVA

Joint Debts and an IVA

Joint debts must be included in an IVA. As such it is important you understand the impact of this on the other account holder.

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What are Joint Debts?

Joint debts are any debts that you are liable for together with another person. A common example would be a bank loan or overdraft that you have in joint names.

You can normally identify these accounts by looking at statements you receive or the original loan documentation. If you both signed the agreement or statements are addressed to both parties the debt is almost certainly joint.

Both parties are liable for the repayment of 100% of a joint debt. If one is unable to repay their share the other is legally responsible for the entire amount outstanding.

If you have a second card holder on your credit card account this is not a joint debt. You have sole responsibility for paying the whole debt. The second card holder is not liable.

Are Joint Debts included in an IVA?

If you start an IVA you are normally obliged to include all of your unsecured debts. This includes any that are joint. However the problem with this is that the Arrangement only protects you.

The other account holder is not protected and is still liable for 100% of the outstanding balance. If they are unable to maintain the payments from their own income the creditor can take enforcement action against them.

In a situation where they cannot afford to continue paying the debt the other account holder may then also need to use a debt management solution.

Secured debt in joint names such as a mortgage is not included in an IVA. The payments towards this must be made as normal. A provision is included in your living expenses budget to allow for this.

Can Joint Debts be left out of an IVA?

You cannot leave an unsecured debt out of an IVA. They must all be included other than in very specific circumstances. As such all unsecured joint debts in your name must be added.

The fact that these debts are included will not be a problem for the other account holder as long as they continue paying the debt. Given they can afford to do this their circumstances and credit rating will remain unaffected.

However payments can only come from their own income. They cannot come from you. If the other account holder does not have sufficient funds in their own right to maintain the debt the payments will stop. The creditor can then start enforcement action against them.

Options if the other Account Holder is unable to pay

If the other joint account holder cannot afford to maintain payments towards the joint debts from their own funds it is likely they too will need to use a debt management solution.

One option is to start a Joint IVA. Both parties start a seperate agreement. However you make a single monthly payment as both are based on the same household income and expenditure budget.

When you use a Joint IVA it does not matter if one of you generates most of the household income. Both you and your partner can manage all your debts but in affect only one party is paying them.

You do not have to start a Joint IVA if you have joint debts. The other account holder can choose an alternative debt solution if they wish.

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4 thoughts on “Joint Debts and an IVA

    Maureen says:

    My sons ex partner was given an IVA a few months before they split last September. He has just discovered that a joint bank account which he had forgotten was made overdrawn by the payment of a direct debit. It is now in the hands of the banks collection team as letters to his ex partner have been ignored. This has now affected his credit rating. What can he do?

      Hi Maureen

      If your son’s bank account was in joint names with his ex then both he and she are jointly liable for any overdraft balance. This is regardless of how the money was spent (ie whether the direct debit was in relation to a payment on behalf of her or him). If the overdraft is not paid then the bank is perfectly within their rights to chase both parties. If the balance remains outstanding both their credit files will be affected accordingly.

      The only solution available to your son to prevent his credit rating from becoming further affected is to pay the debt. If he does not then the bank will continue their collection activities against him. Ultimately this may mean that they apply for a CCJ against him. If this were to happen it would remain on his credit file for 6 years making it very difficult for him to get new credit during that time.

    Rachael D says:

    HI My ex partner has taken out an Iva and we had joint unsecured loan will a percentage be paid through his iva and I pay the remaining percentage

      Hi Rachael

      If your ex has started an IVA, the standard procedure will be for the loan company to contact you and demand full payment of the outstanding balance.

      It is true that you will not have to pay 100% of the balance because a percentage of the debt will be paid via the IVA. However, this percentage is likely to be very small and is unlikely to be received from the IVA for a number of years. As such, you are likely to have to continue paying until the debt is virtually fully paid.

      If you will struggle to do this, you may need to consider a using a debt solution yourself.

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