Will my partner/spouse be affected by my IVA? IVA FAQ

Summary: Will my partner/spouse be affected by my IVA? - For those who are married or co-habiting and considering an IVA (Individual Voluntary Arrangement), it is important to understand the effects of an IVA on partner/spouse. This article seeks to address this question.

Joint IVA's

Strictly speaking an IVA is an individual arrangement (hence Individual Voluntary Arrangement). However where a married or co-habiting couple are both debtors (either each has debts or there are debts in joint names) then it is usual to prepare an interlocking IVA - as finances are clearly intertwined.

Single IVA's

Where one person in a relationship is the debtor it is likely that the assets and disposable income belonging to the other person should be protected. It may be that the one without the debt has benefitted equally from the debt and this may be considered when assessing what is fair. However legally the debt belongs to the named person, and it is their IVA and not the spouse/partners.

Do I need to disclose partner's income?

The usual answer is yes - if only to demonstrate how the household finances work. If the debtor was unable to repay their debts because they were paying all household bills, whilst the partners was working but not contributing then creditors of the debtor would be less than impressed. So - total household income/outgoings usually need to be disclosed.

Example

Jane is applying for an IVA, but her partner John has no debt. Jane's net income is £2000/mth and John's is £1000/mth. From the combined £3000 income, they have shown they need £2550 to cover all household and personal expenses. This leaves £450/mth disposable income. Of this, John would be entitled to keep one this (his income is one third of total) = £150. Jane's available income for the IVA would be £300/mth. It may be considered that Jane would pay two-thirds of all bills, but the principle of the partner keeping their fair share of the total disposable income remains the same.

The partner may be better off

For many couples the debtor has been depending on their partner to pay more than their fair share of bills, simply because the debtor is paying so much on debt repayments. Once an IVA has been set up, the debtor is paying a lower figure and the partner is better off as they are no longer subsidising all the bills i.e. the debtor is now able to pay their fair share.