Significant debt can be more than just a financial worry. It can impact your entire life, from your working life to the relationships you have with your nearest and dearest. Luckily, there are debt management solutions available that can help you regain control of your personal finances. One type of solution that can provide this lifeline is an Individual Voluntary Arrangement (IVA).
However, the impact it may have on your family – and in particular your partner – needs to be considered before deciding if this is the solution for you. In this guide, we take a look at how debt, debt management and, in particular, an IVA can impact your spouse or life partner.
To do this, below we answer a range of common questions related to how an IVA might affect your relationship, your partner’s credit rating, and any shared assets you may have.
Do I have to tell my partner about my IVA?
Put simply, no. Legally, you’re not required to inform your partner if you’re entering into an IVA, as long as none of your debts are joint debts.
That being said, hiding this information from your partner is not recommended. Communication and openness are key to any relationship. This is especially true when it comes to financial matters. Concealing significant financial problems can put a strain on your relationship and lead to misunderstandings and complications in the long run. By being as open as possible with your partner about your financial situation, you can ensure you’re both on the same page and are able to provide the support each of you may need to get through the turbulence.
When it comes to the IVA process itself, being upfront with your partner can also make the situation much easier to navigate. This is because, when entering into an IVA, you’ll be asked to provide a detailed outline of your total household expenses by your Insolvency Practitioner (IP). By discussing this with your partner early, you’ll likely be able to provide a more accurate account of your finances, helping the process run more smoothly. This may also impact how much your IVA will leave you to live on.
Will my IVA affect my partner’s credit rating?
One of the most common concerns related to entering an IVA is the impact it might have on your partner’s credit score. The good news is that, generally speaking, your IVA will not directly affect your partner’s – or any other family member’s – credit score.
Creditors can’t mark the credit file of your partner as a result of your financial activities. Credit reports are individually maintained. This means all information about your personal IVA will typically not be shared with the credit reference agencies that generate your partner’s report.
However, it’s important to remember the above is only true if all of your finances are 100% separate. If you have any combined financial connections, such as a joint bank account or a joint mortgage, potentially your partner’s credit rating could be indirectly affected by your IVA.
Additionally, if any of your debts are joint debts, it’s likely that your IVA will impact your partner’s credit score. This is because, in these circumstances, creditors will assess the entire financial situation connected to the debt. This will typically include an assessment of both of your incomes and current debt level. These checks usually lead to a reduction in your credit score.
Will the home I own with my partner be affected by my IVA?
An IVA covers all of an individual’s assets, including any specific share of a property they may own with a partner. This means an IVA can affect the home you own with your partner, even if the debt is solely yours. However, this is not always the case.
For this reason, property can become a grey area when it comes to IVAs, and there are a few things you need to be aware of before entering into one. For example, the official ownership status of the home you and your partner live in can impact if, or to what extent, it will be affected by your IVA. One scenario could be if you own a home as joint tenants -, the ownership is equal, meaning the property will transfer into the sole ownership of the surviving partner in the event of death. With joint ownership, your property is less likely to be impacted by your IVA.
On the other hand, this may not be the case if you own the property as ‘tenants in common’. In this scenario, both you and your partner own a legally defined share of the property. This might not be an equal share. When this is the case, the percentage of the property that sits in the name of the person with the IVA may be considered an asset that could be used to repay creditors. While it’s unlikely you’ll have to sell your home when entering into an IVA, you could be asked to release equity from your share of the property. This could, in theory at least, have implications on the living arrangements of you and your partner.
The consequences of this aspect of an IVA once again highlights the importance of discussing the implications of an IVA with your partner prior to entering into one.
Can you have a joint IVA?
As the name suggests, IVAs are designed to help individuals struggling with debt. For this reason, you and your partner cannot enter into a joint IVA to tackle joint debts. However, it’s possible for a joint loan – one in your partner’s name as well as your own – to be included in a personal IVA. When this happens, you will only be responsible for a predefined portion of this debt as part of your IVA. The remaining debt will still sit with your partner.
Although joint IVAs don’t exist, it is possible to enter into an ‘interlocking IVA’. This is when two separate IVAs – one for you and one for your partner – are administered separately but paid through the same monthly payment. This can be a good option if your partner’s personal debt levels are too small for standalone IVAs.
Overall, it’s almost impossible to conclude that an IVA will not impact the life of your partner in any way. This could be a direct impact, depending on the status of your joint finances, or simply the indirect impact of supporting you through a difficult period in your life. Either way, it’s important to remember that facing financial difficulties together is much better than facing them alone.
To discover more about IVAs, or to find out what other support may be available to you and your partner, seek professional advice for free by contacting MoneyHelper, or get in touch with us today.
