Guarantor Loan and IVA

28/03/2023
Guarantor Loan and IVA

It is possible to include a guarantor loan in an IVA. However the Guarantor then becomes liable to pay the outstanding debt.

Included in this article:

Want help to start an IVA?

Give us a call: 0800 011 4712 or complete the form below to speak to one of our experts

Can a Guarantor Loan be included in an IVA?

As an unsecured debt, a guarantor loan can be included in an IVA. Once the Arrangement is accepted you are legally protected from the loan company in the same way as any other creditor.

However the person who has guaranteed the loan is not protected. They then become responsible for making the payments instead of you.

If they can afford to do this it may not be a major issue. There is nothing to stop you agreeing to pay them back after your Arrangement has finished if you wish.

If you start an IVA and your Guarantor cannot afford to pay the loan they may be forced to start their own debt management solution.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

What is the problem with a Guarantor Loan?

A guarantor loan is money lent to you on the understanding that if you do not pay it back, someone else (the Guarantor) will have to do so on your behalf. In these circumstances, they become responsible for maintaining the ongoing payments or paying the balance in full.

You can ask anyone to act as your guarantor. Commonly it would be a family member or close friend. Before you get the loan they will have to sign an agreement to confirm they understand they could become liable for the outstanding amount.

If you don’t pay your loan for any reason the finance company will contact your guarantor and demand they start paying on your behalf.

Where your Guarantor cannot or will not pay the debt, the loan company can take legal enforcement action against them.

Can you leave the loan out of your IVA?

You might consider leaving your guarantor loan out of your IVA. This way you could avoid the guarantor having to pay it or even learning about your debt problem. However it is unlikely you will be able to do this.

You will not be allowed to include a specific amount in your living expenses budget to maintain the loan payments. If you try your other creditors are likely to reject your application on the basis that they are being treated unfairly.

As such the only option would be to try and keep paying the loan from your agreed expenses allowances. However this will put you under considerable financial pressure and may result in you not being able to maintain your IVA payments.

If possible it is best to pay off a Guarantor Loan before starting your IVA. Your guarantor is then released from their responsibility. They will not be liable if you start the Arrangement with your remaining creditors.

Can you start an IVA if you are a guarantor for someone else?

There is nothing to stop you applying for an IVA if you have agreed to act as a guarantor for someone else. However you must declare the loan you guaranteed in the list of your debts.

Once the Arrangement is in place if the person responsible for the loan stops paying you will be protected. The loan company cannot chase you for the money.

Having said that the Arrangement only protects you. Legal action to recover the debt can still be taken against the person who took the loan in the first place.

If you are a Guarantor and start an IVA is should not affect the person who borrowed the money. As long as they continue to make the agreed repayments there should be no problem.

Need help to start an IVA? Give us a call (0800 011 4712) or complete the form at the bottom of this page.

Share
Related Articles
IVA Suitability 55

53 thoughts on “Guarantor Loan and IVA”

    Leanna says:
    14/02/2020 at 17:57

    Hi there,
    My friend and I got a loan in her name and I acquired half therefore agreed to pay for my half, I’ve been paying consecutively for 3 years, but I have just found out she has entered an IVA .. should I continue paying for a debt that has been consolidated etc
    Many thanks

    Reply
      James Falla says:
      14/02/2020 at 18:53

      Hi Leanna

      If the loan is only in your friend’s name and not yours then you are not legally liable for it. Given the loan is included in her IVA, 100% of it will be written off with all her other debts within the Arrangement.

      Legally speaking you should not continue paying towards the loan once the IVA started as this would be a preferential payment to one creditor over the others. This is not allowed. On top of that given the IVA is now in place, the creditors would not expect additional payments from another source and it is simply a waste of money.

      That said if you making your payment directly to your friend, she might be relying on this to afford her IVA. As such you should perhaps have a chat with her first before you stop paying her…..

      Reply
    Ashleigh says:
    15/06/2020 at 10:23

    Hi,
    I am after advice. My mum is currently struggling with debt, and is considering applying for an IVA. She currently has a guarantor loan with amigo loans. This would be her highest debtor, she has rung one company regarding an IVA and was told because of the amigo loan she couldn’t have one. If her guarantor was to take over the payments (she has spoken to him regarding this and although he is unhappy he will do it with the view she pays him back once the IVA had finished) would she then be able to apply for the IVA, as the amigo loan would then become her guarantors loan as such. Any advice would be greatly appreciated

    Reply
      James Falla says:
      15/06/2020 at 19:13

      Hi Ashleigh

      Amigo are known to reject IVAs on the basis that it “would not be fair on the guarantor” to leave them with the debt….. The way to resolve this is for your Mum to stop paying the loan a month or two before applying for an IVA. Amigo will then contact the guarantor and ask them to maintain the payments. Once this arrangement has been set up, your Mum could then apply for an IVA. Amigo would not object because the guarantor is already involved and paying the loan.

      Reply
    Katrina says:
    07/09/2020 at 16:23

    Hi. My partner is a guarantor on a loan with amigo and we have been left paying it for the last 6 months. The company have reduced the payments to 120 a month for the next 14 years but with all our other debts it is getting to much as we also have 5 children. If my partner goes into iva will the debt go back to the person who took the loan out or will we have to pay it through iva ?
    Thankyou

    Reply
      James Falla says:
      07/09/2020 at 16:33

      Hi Katrina

      Given the situation it sounds as though an IVA would be a sensible option for your partner. If he starts an IVA, the guarantor loan he is now paying would have to be included in the same way as all of his other debts. This will make his and your lives a lot easier.

      In terms of the person who originally took the guarantor loan they always remain liable for the debt. As such if your partner starts an IVA this will only protect him. It is therefore possible that the creditor will go back to the original borrower and demand payment of whatever balance is not paid in the IVA. That said I have not heard of this happening so it is probably fairly unlikely.

      Reply
    Sha says:
    08/09/2020 at 11:00

    Hi,

    I am receiving conflicting information as to wether I am liable to pay my ex partners loan or not. He was accepted for an IVA but I guarantored for it. He thinks as he has the IVA and the debt is his I do not need to make payments on his behalf, but Amigo are ascertaining I do and that they could apply for deductions of earnings, ccjs against us both etc. I have established with them I do not have means to pay, even prior to his IVA. Could you advise? Many thanks

    Reply
      James Falla says:
      08/09/2020 at 12:28

      Hi Sha

      Unfortunately your partner is not right. If you are the guarantor for his loan and he has started an IVA, then Amigo are 100% within their rights to demand that you pay the balance. You are now liable to pay the debt. Your partner’s IVA does not protect you.

      If you do not have the means to pay then you will need to consider starting a debt management solution of your own to deal with the problem.

      Reply
    Darren says:
    27/10/2020 at 11:14

    Hi my guarantor has entered into a Iva and I’m about to , who will they chase and are we ok

    Reply
      James Falla says:
      27/10/2020 at 15:59

      Hi Darren

      If both you and your guarantor start an IVA, then you are both protected from the guarantor loan. The loan company will no longer be able to enforce collection against either of you. As long as you both complete your IVAs you are legally protected and neither of you will have to worry.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *