Divorce can be a challenging and emotionally taxing process, especially when combined with the stress of debt and financial obligations. When going through a divorce, it is essential to address and organize debts incurred during the marriage, considering who took them out and signed for them. Understanding the impact of divorce on Individual Voluntary Arrangements (IVAs) becomes crucial, as financial circumstances may change significantly. In this article, we will explore the relationship between divorce and IVAs, providing insights on managing debts and protecting your financial stability during this challenging time.
Divorce and Debt Responsibility
During a marriage, debts taken out jointly are the responsibility of both partners and must be repaid jointly. You are jointly and severally liable to repay the debt – meaning that you and your ex partner are both responsible for 100% of the debt until it is repaid, it is not a case of owning 50% of the debt each. If a credit agreement is in your name only, you alone will be liable for that debt, and your partner will not be obligated to pay it.
In some cases, the court may order one partner to pay off the other partner’s debt, particularly if additional financial support is required. It is important to understand the legal implications and seek professional advice when determining debt responsibility during a divorce.
IVAs and Divorce
Couples struggling with debt often opt for IVAs or joint IVAs, also known as interlocking IVAs, to manage their financial obligations. However, when facing divorce, the dynamics of an IVA may be affected due to changes in household income, child or spousal maintenance payments, or the need to establish new living arrangements.
The impact of divorce on an interlocking IVA varies depending on the circumstances of the separation. It is generally advisable to work together with your ex-partner to maintain monthly payments during and after the divorce proceedings. Completing the IVA benefits both parties, as it allows them to regain financial stability.
In some instances, the joint IVA may be split into two separate IVAs, however this will require the process of a variation and approval from your creditors. You and your ex partner will then be solely responsible for your own IVA if approved.. Alternatively, you can reach an agreement with your ex-partner, continuing with an interlocking IVA until it reaches completion.
Consulting your Insolvency Practitioner is crucial to explore available options. They can provide guidance on potentially splitting the IVA, reducing payments to a more affordable level, or even exploring alternative debt solutions if the IVA is no longer suitable.
Impact on Property and Remortgaging
If you own a home and decide to sell it during the IVA, your share of the equity may need to be paid into the arrangement. However, remortgaging can be challenging due to poor credit, making it difficult to release any equity. In such cases, if you are required to remortgage and unable to do so, an additional year may be added to the IVA term to accommodate the situation.
It is crucial to communicate with your Insolvency Practitioner about your specific circumstances. If you find yourself in a difficult situation and your IVA is with Debt Movement, do not hesitate to contact them to discuss your situation and the availability of alternative options.
Navigating the complexities of divorce while managing debts and IVAs requires careful consideration and professional guidance. As the landscape evolves in 2023, it is essential to communicate openly with your Insolvency Practitioner and ex-partner, seeking solutions that maintain financial stability and cater to your changing circumstances. By actively engaging in discussions and exploring available options, you can effectively manage your debt obligations, maintain IVA payments, and comfortably navigate the legal aspects of your divorce.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
