Which debts can you leave out of an IVA

Which debts can you leave out of an IVA

Under normal circumstances you are not allowed to leave out any debt if you start an IVA. All of your unsecured creditors have to be included. If you want to keep paying one or more of them, the solution may not be suitable for you.

Included in this article:

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Can you leave out any debt if you start an IVA?

Generally speaking, if you want to start an IVA, you can’t leave out any unsecured debts. All the creditors you owe money to must be included. There are two very good reasons for this.

First, the creditors which are included are very unlikely to agree to accept reduced payments (and ultimately write off some of the debt you owe them) if they know others are being paid in full.

Second, even if your other creditors were to agree, trying to keep up with one or more of your monthly debt payments will probably mean you are then unable to afford the minimum payment needed to start an IVA.

One of the only unsecured debts that can be left out of an IVA is rent arrears.

If you owe money to your landlord, you will usually have to make a separate agreement to repay this direct with them. This is because if you were to try and include this type of debt in the Arrangement, you could risk being evicted from your home. Your IVA payments would be expected to increase once the arrears are cleared.

Are you allowed to leave out a guarantor loan?

No. As with your other unsecured debts, a guarantor loan has to be included in an IVA. You can’t leave it out and simply use the Arrangement to manage your other creditors.

If you were to try and leave out this debt, you would have to continue making the monthly payments. Even if you could afford to do this, it would probably mean you would have nothing left to pay your IVA.

That said, including the loan will also give you a big problem. As soon as the IVA starts, the loan company will contact your guarantor who will then become liable and have to pay the debt.

You are unlikely to want this to happen so an IVA is often not a suitable solution if you have this type of debt.

The only time a guarantor loan can easily be included in an IVA is where you have already defaulted on the payments and your guarantor is already paying the debt.

What happens to a joint debt?

If you have a joint debt with someone else, you must include this in your IVA.

That said, the debt will still have to be paid by the other joint account holder. This is because your IVA only protects you. It does not protect the other person. They are still liable for 100% of the outstanding balance.

Technically then, the debt is left out of the Arrangement.

If the other account holder can’t afford to maintain the payments, you will both need to consider starting a joint IVA. Alternatively you do your IVA and they use a different debt solution such such as a debt management plan.

If you have a joint debt, this has to be included in your IVA. However, the other account holder will still be responsible for the ongoing monthly payments.

Is it possible to leave out family debt

You will need to think carefully about any debt you owe to friends and family. You don’t have to include it in your IVA. However it is very unlikely that you will be able to keep up any agreed repayments towards it.

Including monthly repayments towards this debt in your living expenses budget is not possible because the other creditors will not agree. Given this, the best possible scenario is to suspend further payments until after your IVA is finished.

If this is not a realistic option, an IVA may not be for you. You might have to manage your other debts with a debt management plan until your family is repaid and then re-visit the option then.

Of course, you can add family or friends debt into your IVA if you wish. However, this will mean they will find out about your financial circumstances. In addition they will not be repaid in full (although you can always agree to repay any balance you still owe after your IVA).

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