How Joint debts are treated in an IVA
IVAs and joint debts can be complicated; especially where there are both joint and non-joint debts or one person is entering an IVA, and the other is not. For clear advice, specific to your own circumstances, please contact us.
What are joint debts?
Many of the IVAs we prepare are for partners with some joint debts whose IVAs are linked to each other
Joint debts usually when two or more parties, (but usually a couple), have signed a credit or loan agreement together or some other form of contract for goods or services. Usually, each is individually responsible for the entire debt.
Examples of joint debts are often secured loans taken out by both parties; tenancy agreements entered into by both; HP agreements entered into by both; council tax and certain utility agreements where both sign-up.
Guarantor loans are normally classed as joint debts when it comes to insolvency, which often comes as shock to the guarantor.
Joint agreements are attractive to lenders each signatory is individually liable for the full 100% – there is no 50-50 split. If one of you dies, disappears or goes bankrupt, the lender can go after the other partner for repayment of the full balance.
The lender improves the likelihood that the loan is repaid if there are two parties that they can pursue.
Are Credit Cards Debts Joint?
No. Credit cards are never issued in joint names.
The credit agreement is with a primary cardholder, who may have requested an additional card for their spouse/partner. Any additional cardholder simply gets the facility to spend on the primary card holder’s credit. All debts are in the primary cardholder’s name. It does not matter which card is used.
My partner’s debts
You are not liable for anyone else’s debts unless you co-sign a credit agreement or are acting as guarantor.
This is true even when you are married, have a civil partnership, or live with them with shared financial responsibilities such as children or a joint mortgage. Conversely, you can not include someone else’s debts in your IVA.
Joint debts and IVAs
Joint debts must be included in an IVA, regardless of the wishes of the solvent party.
Where one person enters an IVA, creditors can pursue the other solvent person for the full outstanding balance of any joint debts.
This means if your IVA works out that you are repaying say 40% of your total debts; this will mean you are paying 40% of each debt. A creditor can pursue the other party for the other 60% outstanding on the debt owed to them.
Interlocking IVAs
If the best solution for you and your partner is an IVA, you can each set up linked, or ‘interlocking’ IVAs.
Interlocking IVAs are administered together and you make one joint payment between you. This ensures fairness taking into account eaches household contributions.
With interlocking IVAs, any joint debts are included in both IVAs. The joint debts get payment from the interlocking IVAs and once they’ve ended anything still owing is written off.
For advice specific to your joint debts and exact circumstances, contact us, we’ll clarify the situation for you.