The Institute of Financial Planning (IFP) have released the results of a...
What happens if we split up during our joint IVA?
This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. Before considering an IVA as a debt solution, please make sure you fully understand the risks involved when entering an IVA. Please be aware that there is a risk of bankruptcy should your IVA fail.
Nobody has a crystal ball and we can’t predict the future. When you enter a form of insolvency such as an Individual Voluntary Arrangement (IVA) you’re financially planning for the next five or six years.
However the best made plans of your IVA sometimes don’t come to fruition.
Sadly, as part of our day-to-day work, we sometimes come across cases where marriages or relationships break down. This can be made even more complicated when you’re financially connected, particularly if you’ve got a joint and interlocking IVA.
Joint IVAs and relationship break-up
The first thing to remember is that we can help, and the quicker you get in touch with us the better. We don’t give advice on relationships but we can advise on how a break-up might affect your financial position.
In a joint IVA, your IVA and your partner’s IVA are interlocking, so often the effect of a break up on your IVA can depend on how amicable the split is. We’ve seen some instances where clients have separated and also moved house but they’ve been willing to allow the joint and interlocking IVA to continue on its current path.
Depending on the wording of your IVA agreement, one option we could look into is doing a variation of your joint and interlocking IVA. This would split your IVAs so they’re independent of each other and would help keep the debt solution in place and on-track. However, a variation might not be necessary if the two parties come to an agreement about their IVA payments.
It’s important to be aware that if your IVA fails, your creditors might ask your Supervisor to petition for your bankruptcy, but this is unlikely. You can take a look at our website for more information about other issues to bear in mind when it comes to your IVA.
We don’t talk anymore
All IVAs are different and some may have specific wording regarding break-ups. ‘Breakage of interlocking IVAs’ clause can be found in section 4 of some IVA proposals.
“If my relationship with my partner ends by a permanent separation, divorce or death during the term of the IVA, the Supervisor has discretion to allow my IVA (and if appropriate that of my partner’s IVA) to continue as a distinct and separate Proposal.
On the date that either myself or my partner confirms in writing to my Supervisor that the relationship has ended permanently and that either one of us no longer wishes to have an interlocking IVA then my Supervisor at her discretion may apply the following:
- In the event that there are any realised funds available in the interlocked voluntary arrangement but not distributed they will be distributed pari passu* in the order of priority as set out in the proposal as if the proposal were still interlocked.
- Any liability for debts will no longer be treated as joint and several unless the debts were joint and several prior to the approval of the Proposal once any realised funds as set out above have been distributed (if available).
- My Arrangement and that of my partner will no longer be treated as being interlocked and will no longer be administered as if one Arrangement once any realised funds as set out in point 1 above have been distributed (if available).
- Any unrealised assets will no longer be treated as being jointly owned in equal shares but will revert to the ownership applicable prior to the approval of the Arrangement.
- The Supervisor will convene separate meetings of both mine and my partner’s individual creditors to agree the terms on which each of our IVAs may proceed and notice of those meetings will be sent to mine and my partner’s respective creditors and be separately voted upon.
What this means in layman’s terms is that the Supervisor has the power to help both parties either separately or together, and that a joint and interlocking IVA may become two separate IVAs.
In some circumstances an IVA may no longer be the best debt solution for one of the parties. If this is the case the Supervisor of the IVA will advise on what other debt solutions are better suited.
It’s all in the proposal
Whether you have the above clauses in your proposal or not, the initial wording of the joint IVA proposal is important. If you’ve agreed to do anything that you now can’t because of the split your Supervisor will need to look into it and see what can be done.
Just because you’ve split from a partner it doesn’t mean your IVA will automatically end. It also doesn’t mean that you may be released from any commitments you made towards your partners debts or joint finances when you initially signed up for an IVA.
Just good friends
The most important thing is to read and check your initial IVA proposal and speak to your Supervisor as soon as possible, we’ll do our best to keep you on the path towards being debt free, whatever the circumstances.
*’pari passu’ means divided proportionally