Wanting to change to IVA but have joint debt with ex husband
As part of my divorce I agreed to take on the loan / credit card debt and to keep the equity in the house (it works out the same amount). This was to save me selling the house as I am a carer for my autistic adult son as we would have been homeless. The divorce etc was stressful enough so this seemed the best option at the time.
I have been paying into the DMP for 2 years now and I have an estimated end date of July 2036!!
I am due to do my annual review and I have read about IVAs and I am wondering if this is a route I can take now that I am more financially stable after the divorce. I am budgeting okay so able to sign up to something more permanent.
My problem is that I have a joint loan that I want to keep out of the agreement. Is this allowed? The reason I want to keep it out is that it is listed in the consent order and we have both agreed to pay our half til the end of the agreement and if not we will be breaking the court order.
Once the joint loan is paid in 2 years time I will pay the money I use for this into my IVA (assuming you can increase payments as I know it’s a fixed agreement).
Any guidance would be appreciated.
I have been paying into the DMP for 2 years now and I have an estimated end date of July 2036!!
I am due to do my annual review and I have read about IVAs and I am wondering if this is a route I can take now that I am more financially stable after the divorce. I am budgeting okay so able to sign up to something more permanent.
My problem is that I have a joint loan that I want to keep out of the agreement. Is this allowed? The reason I want to keep it out is that it is listed in the consent order and we have both agreed to pay our half til the end of the agreement and if not we will be breaking the court order.
Once the joint loan is paid in 2 years time I will pay the money I use for this into my IVA (assuming you can increase payments as I know it’s a fixed agreement).
Any guidance would be appreciated.
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Comments
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Hi Carrera74,
As far as I am aware, you would not be able to exclude this loan. So, for the immediate future, it sounds like an IVA is a 'non-starter'. Once the loan has finished you could reconsider this. There are several things to consider with an IVA, especially as a homeowner.
First of all, if your equity is more than your total debt, it is unlikely to be suitable. The point of an IVA is that you pay for 5-6 years and at the end, any remaining debt is written off. But if your equity is more than what you owe, no debt may end up being written off. As a homeowner you will be asked to agree to an equity release clause as part of the IVA. This asks you to take out a secured loan against your home (normally in the 4th year of the IVA) to try and end the IVA early. This is rarely successful because your credit file is already quite damaged from the IVA.
In addition, it is quite a restrictive option, and lowering payments if something goes wrong, can be tricky. However, payments can increase if you have more money available. If you cannot maintain the payments, there is a risk of bankruptcy, which would put your home at risk.
That all being said, an IVA does offer a fixed timescale for people to be debt free; the interest, charges and letters from creditors will all stop as well. Hopefully that helps gives you some insight to this option. It is a big decision so make sure you speak to one of the free debt charities before signing up to anything.
Laura
@natdebtlineWe work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps0 -
As much as I am loathe to do this, I cannot agree with almost anything Laura has said there.
The court order for you to pay the debt is, frankly, worthless. if you did not pay it, then the credit company would chase your ex, and vice versa. They will NOT transfer the debt into your name, despite the court order, hence rendering the order irrelevant in terms of Insolvency law. The debt does have to go in therefore, which will save you money on your outgoings as they stand. Your ex will obviously be chased for the remainder that is not paid to the IVA, but that is no different to the legal position now anyway.
It is true that equity can play a part in whether an IVA is accepted or not, and there are certainly creditors that will vote against it if you do have more equity than debt. However, there is not enough information in your original post to make that sort of sweeping assumption.
A few questions, if I may:
Who do you owe the money to, and how much to each?
Is the house still in joint names? If it is, your share is obviously diminished.
How much is it worth?
How much is owed on the mortgage?
How much are you paying to the DMP? Who is your DMP with?
Do you work at all, or are you a full time carer.
If you are a full time carer, and provided you do do not have unfriendly creditors, then you will never be able to release equity anyway, so a 6 year IVA is a distinct possibility in those circumstances.
Laura does make some good points in terms of lowering payments, and of the risk of further action if you default on an IVA, however with your 19 year DMP you run that risk now anyway, even if you make all your payments as a DMP is not legally binding on anything or anyone. As ever, the devil is in the detail, and you may not qualify if you do have unfriendly creditors but it must be you that chooses. Choice is always the key.0
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