Of necessity, an IVA is a single debt solution. The letter “I” in IVA stands for individual. However when it can be demonstrated that a couple (married or co-habiting) both have individual debts or joint debts, then the 2 individual IVA’s can be presented as one interlocking IVA. Joint income less joint expenditure = joint disposable income for an IVA. One payment is made per month to cover all debts.
In a situation where there is just one of the couple in debt – then the single IVA will be presented and this shouldn’t impact the other party. However (and to the concern of some) creditors still want to see joint income and expenditure. The reason for this is that couples vary greatly in the way they organise their finances. And creditors in an IVA want assurances that the debtor is paying his or her fair share of the household bills but not more than. If for example, a couple were each earning the same income, the assumption would be that each is paying half the household costs. If one pays the rent and the other pays the food and bills – this is fine – but creditors will want some evidence of the figures involved to check that the arrangement is fair. If the rent came to £700 and the bills and food came to £500, the creditors would feel that £600 each would be fairer – possibly freeing up some funds for the debtor to include in the IVA payment. Where income levels vary, the assumption would be that household costs were divided proportionately according to relative incomes.
For some couples, a different solution for each may be required. One may qualify for an IVA and the other not. One may feel they can afford to maintain contractual payments, and the other not. Again, for the debtor proposing an IVA, their creditors will want to feel that monies set aside for debt payments is done fairly. In the joint illustration above. If the couple owed £12,000 each – and the joint disposable income was £300/month – the assumption would be that each of the couple had £150 to contribute to debts. An IVA at £100 for client 1 allowing client 2 to maintain contractual payments of £200 may not sit well with client 1’s creditors. If for some reason client 2 doesn’t want (or can’t) enter an IVA, then client 1 could propose an IVA at £150/month and client could opt for a Debt Management Plan. Each party in the couple are making use of their fair share of the disposable income.