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IVA

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Debt and Divorce

Divorce can be a stressful, long and emotionally draining process. But, when you add the stress of debt to the worry of the divorce settlement — and often child maintenance payments — it can bring up a lot more tension.

When getting a divorce, you will need to organise your debts with your spouse based on who took them out and signed for them. During a marriage, any debts taken out jointly will be in both of your names and will need to be paid back by both of you. If you have signed for a credit agreement in your name only, you will be responsible for that debt and your partner will not be liable for paying the debt.

When you get divorced, the court could order that one partner pay off the other partner’s debt. This could happen for a number of reasons, for example, if one partner requires additional financial support.

If you hold a joint bank account with your ex-partner, you will both be responsible for the credit or debt that account holds. You may find that one of you has spent more than the other (maybe without the other’s permission), but you’ll both be equally liable for any debt in the eyes of your creditors.

IVA and Divorce

In many instances, couples who are struggling with debts enter into an Individual Voluntary Arrangement (IVA) or a joint IVA, also known as an interlocking IVA. This is because their finances are connected in terms of their living expenses (and possibly their debts too). If you have an interlocking IVA in place to help manage your debts, it is important to understand how this is affected by a divorce.

Will a Divorce Affect My IVA?

Your household income may have been reduced as a result of the separation, or you might need to make child or spousal maintenance payments as a result of your divorce or you may need to move out of the marital home and start over, and because of this, it may be difficult to maintain your IVA payments.

In regard to an interlocking IVA, whether or not it is affected by a divorce often depends on the nature of the separation. If possible, people try their best to maintain the monthly payments with their ex-partner during and after divorce proceedings as it is in both of their interests to complete the IVAand make their way back to financial stability.

Depending on the terms and conditions outlined in the original proposal, it may be possible for the joint IVA to be split into two separate IVAs. Regardless, it’s important you and your ex-partner come to an agreement — whether this means continuing with an interlocking IVA and trying to make the repayments, or asking your Insolvency Practitioner to revise your proposal to see if your agreement can be split into two independent ones.

If you are unsure in any way, please contact your Insolvency Practitioner so they can explore the options available to you. It may be possible to split the IVA or to reduce the payments to a more affordable level following the change in circumstances. If the IVA is no longer suitable, it is possible to look into other debt solutions, so don’t worry. If Debt Movement is your IVA provider, contact us today to discuss your options with one of our friendly and knowledgeable guides.

How Will an IVA and Divorce Affect My Property?

If you are a homeowner and decide to sell your property, your share of the equity in your home may still need to be paid into your arrangement.

If you are looking at remortgaging whilst in your IVA, this can be difficult because of poor credit, and it may be difficult to release any equity. If you have equity and are required to remortgage during the IVA and you are unable to, another year will be added to the IVA term to cover this.

Again, talk to your Insolvency Practitioner about the options available to you. A good IVA provider will make sure that your best interests are looked after. If your IVA is with Debt Movement, contact us here to discuss your circumstances and whether there are other options available to you.

It is always in your best interest to discuss any change to your circumstances with your Insolvency Practitioner.

Your Insolvency Practitioner or IVA provider might be able to help you work out a better way to manage your monthly spending to ensure your IVA payments are not missed, while you continue to live as comfortably as possible and handle the legal side of your divorce.