Will an IVA Affect My Partner’s Credit Rating?

Are you worried about how an Individual Voluntary Arrangement (IVA) could affect your partner’s credit rating? You’ve come to the right place. Each month, over 12,000 people visit our site for guidance on debt topics, just like this one.

In this easy-to-understand post, we’ll cover:

•  What an Individual Voluntary Arrangement (IVA) is
•  How an IVA works and if you need to pay
•  How your partner’s income is considered in repayments
•  The impact of an IVA on your partner and their credit rating
•  Different ways to improve your credit score

We understand your fears about not being able to pay a debt and the consequences of unpaid debt. Our team, who have experienced similar challenges, are here to help you understand your situation. 

So, take a deep breath and let’s explore how an IVA could affect your partner’s credit rating together.

What is an Individual Voluntary Arrangement (IVA)?

A standard Individual Voluntary Arrangement (IVA) is a legally-binding debt solution whereby you pay back multiple unsecured debts through monthly repayments that are considered affordable to you.

Because it’s a formal debt solution with legal weight, your creditors cannot back out of the agreement. There are also serious consequences if you don’t stick to the agreement, including the potential for creditors to make you bankrupt.  

Do you have to pay?

There are ways to have debt written off in the UK.

If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need. 

If you want to find out whether you qualify for having debt written off or payments lowered then fill out the short form below.

How does an IVA work?

Once an IVA is set up, you will make one monthly repayment into your IVA, which is proportionally divided and distributed to all your creditors based on how much you owe each of them.

Setting up and monitoring an IVA can only be done by a qualified Insolvency Practitioner (IP). Consequently, there is an initial and ongoing fee to pay when using an IVA. Citizens Advice estimates that the total fees are around £5,000 over the course of the IVA.  

But these fees are considered as part of your monthly repayments and are deducted from the repayments rather than a separate expense. 

During the IVA you should not be contacted by any creditor that is included in the IVA. However, you might get some letters in the first months after setting up the IVA because these letters are usually already scheduled to be sent. 

The IVA will usually last for five years. Any debt that has still not been repaid to any creditor at the end of the IVA is written off. 

But the IVA might not end after five years…

What happens at the end of an IVA?

Homeowners who come to the end of their IVA may be asked to release some equity (£5,000+)  from their property to make a lump sum payment and finalise the debt solution. You shouldn’t be asked to sell your home.  

If you cannot do this, the IVA may be extended for one more year, meaning you’ll have to make 12 more IVA repayments.

Any debt that is still unpaid after the sixth year will also be written off. There is potential for an IVA to last even longer, but this is only a possibility if you have missed IVA repayments previously and need to catch up.

Can you lower your repayments?

If you’re struggling to pay back your debt, then you might qualify for a debt solution.

Some solutions lower your monthly payments while others write off a portion of your debt. 

To find out whether they could work in your situation, hit the button below.

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Who qualifies for an IVA?

You qualify for an IVA as long as you have at least two unsecured debts. There is no minimum debt required to use an IVA, but having less than £10,000 of total debt may mean that an IVA isn’t the most advantageous debt solution for you. 

This is why you must get personalised debt advice before using an IVA. 

How do you set up an IVA?

You cannot set up an IVA yourself. You must use the services of an Insolvency Practitioner, who will also manage your IVA repayments and IVA restrictions. 

Many people choose to use a debt management company to do this, but some charities can also help you arrange an IVA and continually manage your IVA. StepChange is one debt charity that can arrange this. You’ll still need to pay the fees, but they can provide free IVA advice upfront. 

Creditors don’t have to agree to your IVA proposal, which will be made by your IP. All creditors of unsecured debt must be included and will have the chance to vote on whether to agree to the IVA or not.

If the IVA is accepted by the majority of creditors, or it’s accepted by creditors you owe the most money to, all creditors must be included in the IVA. Just because they voted no doesn’t necessarily mean they won’t have to enter into the IVA agreement with you. 

Can I get an IVA if I have a partner?

Yes, you can get an IVA if you have a partner. 

But there are some things you need to know about IVAs if you have a partner, which I will explain below. 

Is my partner’s income considered in repayments?

For the most part, no. 

Your partner’s income isn’t generally considered when working out your IVA proposal and repayment amount. 

But if your partner was to have a significantly higher level of income, they might be expected to contribute more to essential living costs, which would then mean you would be expected to offer larger monthly repayments. 

On the flip side, if your partner was out of work or had a very low income, your IP might consider this as your income needing to support your partner as well. This could mean having to pay lower IVA monthly repayments. 

Will an IVA affect my partner?

Even though an IVA is a personal debt solution, there is a possibility that it could affect your de facto partner or spouse in some ways.

Does IVA affect other people in the household?

An IVA shouldn’t affect other people but you, with the slight exception that it could affect your partner in certain ways only in some situations. 

Let’s rewind back to that…

How will an IVA affect my partner?

An IVA could affect your partner in limited ways, but it will have a much bigger effect if you own a property together. 

You might be asked to release equity from your home after five years to end the IVA. Equity can only be taken from the IVA user’s share of the property, but this may still require a joint remortgage.

It’s therefore really important to seek clarification on the Equity Release Clause of your proposed IVA from your IP. This is the clause that stipulates how equity should be released after five years if required. 

They can also explain any other ways an IVA will affect your partner, including how an IVA will affect your partner’s credit score…

Will an IVA affect my partner’s credit rating?

This question is often asked by people considering an IVA but don’t want the IVA to negatively affect their loved ones. Sometimes it’s asked by the partners of people using an IVA, such as this forum user:

Source: https://forums.moneysavingexpert.com/discussion/2966870/partner-with-iva 

The answer is: It depends.

If you and your partner have no joint debts that have been included in your IVA then the IVA cannot affect your partner’s credit score. This is because a creditor cannot mark your partner’s credit file because of personal debts you have. 

But if you have joint debts with your partner that have been included in your IVA, your partner’s credit score can be negatively affected as well. 

If you’re going through a breakup or divorce and want to end a financial association with another person, you can apply for a Notice of Disassociation. This will prevent a soon-to-be ex from being affected by your IVA. It cannot be used for joint finances that are still active. 

Will an IVA affect my credit score?

Yes, an IVA can significantly damage your credit rating because it indicates that you weren’t able to repay multiple creditors and companies as originally agreed. 

It can be difficult to get approved for further credit immediately after your IVA has finished. You may need to look for bad credit lenders and pay higher interest rates, or you may wish to try and repair your credit score before making any more credit applications. 

Ways to improve your credit score

There are lots of things you can do to improve your credit score, but some of them take time. As long as you manage your finances well by avoiding arrears and paying debts and bills on time, your score should gradually improve.

Money Helper has published an informative guide on how to improve your credit score effectively. I think it’s worth a read if this is a concern for you, especially during or after an IVA.

Will my partner have to make any IVA contributions?

No, your partner isn’t obligated to make any IVA contributions because IVAs are individual debt solutions. 

However, you might tackle your finances as a household and your joint money could be used to help you get through the IVA and cover joint or essential living costs. 

Do I have to tell my partner about IVA?

There is no obligation to tell your partner about your IVA. Your creditors and your Insolvency Practitioner are not allowed to discuss your debts or IVA with anyone but you.

But there is a little catch here. 

If you own a property with your partner, they might need to give permission regarding the Equity Release Clause of an IVA.  

Can I get a joint IVA?

Not exactly. It’s somewhat of a myth that you can get a joint IVA. 

You can only get an IVA on your own, but in the case of joint debts, both individuals can use an IVA and interlock them to cover the joint debt. 

During the process of using an interlocking IVA, both individuals will have access to conversations about the debt with IPs. 

Can I get a joint mortgage if my partner has an IVA?

Yes, it’s possible to get a joint mortgage when one or both applicants are using an IVA. But it really depends on the lender’s lending requirements and your other financial circumstances. 

Can you get credit on an IVA?

Technically, you’re allowed to apply for credit of up to £500 when using an IVA.

But very few lenders will be willing to lend money to you when they know you’re using an IVA, which they will see by checking your credit report. There could still be some options in the poor credit lending market.

If you wanted to apply for credit of more than £500, you would need to seek permission from your IP first. 

“It will only get worse” 😩

It’s cliché to say, but with debt it’s true; the longer you leave it, the worse the problem gets. 

There are straightforward and effective ways to deal with debt, but you have to know your options. 

Fill out the short form to find out about the debt solutions that could reduce your monthly payments or even write off some of your debt.

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Have you considered alternative debt solutions?

An IVA is an excellent and beneficial debt solution for some people, but it’s not the only debt solution and not the only one that can write off some of your debt. You can learn about other solutions on my How to Escape Debt page for free. 

And you can access free personalised debt advice from debt charities, which will tell you the most suitable debt solutions in your situation!