Summary: This article aims to clarify what could happen when a debtor seeking to enter an IVA is living with a partner.
Individual Voluntary Arrangements (IVAs) are a popular alternative to bankruptcy which allow an insolvent individual with over £10-12,000 of unsecured debt, to repay an affordable monthly repayment for a set period of time to their creditors, after which time, any outstanding debt will usually be cleared. However, there are strict criteria to enter an IVA and the creditors will want to maximise the return on what is owed.
I have just moved in with my partner, will they have to contribute to my IVA?
Assuming the individual already had the debt before they started living with their partner, it is unlikely the creditors will expect them to contribute. Therefore, the partner’s share of any joint income left over after paying the bills would be left with them. An example could be as follows; if the debtor earns £2000 per month, and their partner also earns £2000 per month, and after paying all essential expenses, the remaining income is £800, this would be split by proportion of earnings (in this case 50:50) resulting in the debtor paying £400 per month into the IVA with the remaining amount being left with their partner.
My partner and I have lived together for many years, during which time, I have accrued debt in my name, will they be expected to contribute to my IVA?
If the debt was accrued while living together, even if it is in the debtors name only, the creditors may be of the opinion that the partner will have benefited from debt-funded expenditure. In this instance, they may take a different view and the partner’s income may be taken into account when calculating the budget. This could lead to the whole of any surplus household income being required to be contributed to the IVA (using the above example, if there is £800 surplus income, all of it would be expected to be paid into the IVA).