Your partner is not included in your IVA. However they could still be affected by the Arrangement in a number of ways.
- Is your partner’s income included in your IVA?
- What happens to your partner’s debts?
- What if you have joint debts?
- How is a jointly owned property affected?
Is your Partner’s Income included in your IVA?
If you are living with a partner or spouse their income has to be declared in your IVA application. This is because the amount you pay into the Arrangement is calculated using the household disposable income.
Legally speaking your partner is not responsible for paying debts in just your name. However their income has to be included in the income and expenditure statement to show that they are contributing their fair share towards the household bills.
The fact they contribute to the bills is then reflected by spliting the household disposable income between you. This is done using the same percentage split as your income contributions. Your share will have to be paid into the IVA. Your partner can keep their’s to pay for their own commitments.
Some creditors require that 100% of household disposable income is paid into an IVA. They argue this reflects the fact that both you and your partner have benefited from the money you borrowed.
What happens if your Partner has their own Debts?
Your partner may have debt in their own name. Where this is the case they should be allowed to continue paying it from their share of the household disposable income.
There will only be an issue with this if their monthly debt payments are greater than their share. If so it might be possible for them to continue with their payments if savings can be made from your agreed household expenditure budget.
If not and your partner cannot afford to continue paying their debt you may need to consider a Joint IVA.
If your partner has debts but no income of their own or your creditors demand that 100% of the household disposable income is paid into your Arrangement you will have to consider a Joint IVA.
What if you and your Partner have Joint Debts?
Joint debts are things like joint overdrafts or bank loans. Both parties are joint and severably liable for the repayment. If one party does not pay the other is still responsible for 100% of the outstanding balance.
You must include any joint debts in your IVA. However because the Arrangement only protects you this will result in a problem for your Partner. The creditor can and will continue to chase them for the money.
If they have their own source of income it may be possible for them to continue making the payments from their share of the disposable income. If not then you will need to consider a Joint IVA.
Where you and your partner have joint debts it is common to start a joint IVA. However this is not compulsory.
How is a Jointly owned Property affected by an IVA?
If you are a home owner you will need to agree to try and release equity from your property as part of your IVA. However if it is jointly owned you only have to consider your share of any equity. Your Partner’s share is protected.
You must ensure thay your partner understands you may have to release equity as part of the Arrangement. If they refuse to allow you to do so it could result in the failure of your Plan.
Even though your Partner is not obliged to touch their equity one option you might consider is releasing some of their share to settle your Arrangement early. The offer can be made because it is based on money your creditors would not otherwise be entitled to.
If you are joint home owners it is very important you understand the implications for your property if you are considering a Joint IVA. In this scenario 100% of any home equity becomes available to the Arrangement.