Many people with debts to consolidate have debts in their own name plus joint debts jointly in their own and a partner’s name. This can either hinder or help on the possibility of an IVA.
Debt Consolidation Loans and Joint Debts
Please take caution if your considering consolidating your own debts and your partners debts into a single Debt Consolidation loan. For example if you owe £3,000 and your partner £9,000; overnight your liability has risen to £12,000. If your partner has a good reason for not being able to pay such as sickness, or even skips town - you could be left to repay the entire amount. Hard luck stories will not entertain your creditors if your are not able to pay.
Joint debts and IVAs are seldom straight forawd. To get the best advice for your situation please get in touch.
What Are Joint Debts?
Joint debts are when two or more parties sign a credit or loan agreement together. In most cases, all parties are individually responsible for the all the debt. This is known as joint and several liability.
Is is not true that, each is liable for half the debt; this is a comman misconception. If one party can’t (or won’t) pay, creditors can and will pursue the other for the full unpaid debt. It does not matter the purpose of the loan, who benefited from the money spent. It does not matter who is, or has been making the bulk of the repayments so far.
If the debt is a joint one, it does not matter if the cause of the debt is the other person’s financial irresponsibility. In the eyes of the law you are both legally responsible for the settlement of the entire debt.
Your 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 also true when you are married, have a civil partnership with, or live with them with shared financial responsibilities such as children to support, joint mortgage to pay etc.
Conversely, someone else’s debts can’t be included in your IVA.
Also, if you separate or get divorced from a partner; this has no bearing on existing agreements which will still bind you together financially. It is advisable to take out a couple debt consolidation loans one soley in each partners name to the appropiate values to make a clean break and repay all the joint debts.
Joint Debts On Credit Cards
Many people we speak to have mis-understood their situation when it comes to debt consolidation of credit card debts. If the debts are on joint credit cards, then it does not matter whose card was used as the underlying credit agreement is signed by both card holders. Both are equally liable for the joint debt.
However, few couples have joint credit cards, although they often think they do.
Normal one party is a a primary cardholder, who has requested an extra card for their spouse/partner/ bit on the side. The additional cardholder is simple given the facility to use the the primary card holder’s credit. All debts are in the primary cardholder’s name. I does not matter which card is used nor whether explicit permission was used by primary card holder for any particular transaction.
Joint Liability & IVAs
In the case of joint debts, where one party enters an IVA, creditors can pursue the other party for the outstanding balance of any joint debts. If there is a high level of shared debt then it may be possible for both parties to enter into separate but linksed IVAs.
If a proportion of your debts are joint with your partner, then you can enter into a joint or linked IVA. The IVA process is the same as a single IVA proposal except that income and expenditure assessment takes into consideration the combined income and combined costs of living.
Whether this is right for you is entirely dependant on your specific circumstances – so please call us for advice.
Linked IVAs
There is no such thing as a joint IVA or a single IVA covering the debts repayments of 2 parties. When both parties qualify for an IVA due to some individual and some joint liability debts. linked IVA proposal can be made.
Linked IVA’s are separate, interlocking arrangements. Each is conditional upon the other and they are administered jointly for convenience. Both must be approved to proceed.
Joint debts but only one party qualifies for an IVA
If you have debts of say £18,000 and your partner has debts of £7,000 and there is an additional joint debt of £6,000 – You qualify for an IVA but your partner does not.
You can’t propose an IVA for the combined debt £24,000. You can potentially propose an IVA for the £17,000 of debts solely in your name. The household budget will have to allow for your non-IVA partner to continue making their monthly debt re-payments, including those on the joint debts, in full.
In other words, your partners, obligation to pay their own debts impacts your ability to may IVA payments on your solely owned debts, so in that respect these other debts are a factor in your IVA.
More advice on Joint Debts
About 40% of our IVA clients have an IVA that links to a partner’s IVA.
IVA’s and joint debts, especially where the parties also have non-joint debts, can be complicated.
For clear advice specific to your own circumstances, please call us.