Linking myself to someone with an IVA

Yazmina

Hi

My boyfriend has just started an IVA which will run for five years or less. He owes around £13k

I have very good credit, no loans, one credit card on which I currently owe £150 and one BTL property.

I have never lived in my BTL and the (interest only) mortgage is more than I can borrow alone on my salary. If we wanted to take out a joint residential mortgage and move into my property I understand that we would need to go through a broker and will probably only be able to get an expensive mortgage.

My question is what are the potential consequences for me if I link myself financially to my boyfriend who has bad credit?

Thanks.

RAS

Hi

I am very confused about how your BF can have an IVA as they are usually only accepted for people with more than £15K debt.

Do not link yourself with BF if he is doign and IVA for two reasons:

1. It will wreck your credit rating.
2. If he is on an IVA and there is any equity in the property in year 4, he may well have to release his share (re-mortgage) to pay his creditors. It is not unknown for the cost of an IVA to exceed the value of the original debts plus fees (usually arounf £6k).

Yazmina

Well I've not looked at the papers myself, but he said he consulted an IFA who has arranged a reduction in the monthly payments to the bank on his credit card, loan and student loan (one payment for all; overpayments are permitted). The total to be paid back is £13k.

Yazmina

Will my credit score be ruined even if we just rent together?

RAS

No renting together is OK. However, you probably need to rent in your name, as he may well fail the credit check if he is on an IVA.

LOOK - check the Insolvency Register on-line; it lists everyone who has done an IVA. It is a public register with no fee. see here http://www.insolvency.gov.uk/eiir/

Steel_2

I haven't posted on this forum for a few months now in an effort to spend less time on here, but what I read in your post worried me so much I decided to do so.

I'm really sorry but either your BF doesn't understand what he's just embarked on or he is spinning you a tale.

1. An IVA means he has averted bankruptcy by taking out an IVA. If he had not succeeded with his IVA application, if his largest creditor by debt value hadn't agreed to it, they could have pursued action to make him bankrupt. He voluntarily declared himself so financially mucked up he was insolvent and that is very serious. IVAs and their Scottish equivalents Trust Deeds are legal undertakings.

2. You should have £15k of debt to take out an IVA, so how he managed to take one out for 13k I'm not sure.

3. He cannot obtain credit above a very small amount for the entire time he is on an IVA, usually set at a limit of about a couple of hundred pounds or therebouts. There's no way he can declare insolvency and then toodle off and get a mortgage.

4. Any assets he owned of any reasonable value were handed over to the Trustee to liquidate to pay creditors. Every 3-6 months or so his trustee will want to see his financial paperwork to evaluate his current financial position. Any bonuses, windfalls like lottery wins or parental monetary gifts, pay rises or new assets above a certain value will be required to be handed over to creditors. Some Trustees use their discretion and will leave your BF with small proportion of any extra money, but some will be hard on him and insist the whole lot is handed over.

5. His credit rating will be shot for the entire time of the IVA and it could take him a few years after it finishes for him to rebuild his credit. technically the IVA will drop off his credit file six years from the date it was put on there, but all lenders have their own criteria for lending and he may find it tough to get any lender willing to take the risk on him.

6. If you two manage to get a mortgage, you will be breaking the terms of his legal agreement regarding the amount of credit he can obtain. If you two already had a property, its value would be assessed at the start and a share of the equity above a certain amount would be required to be released and handed over to creditors by remortgaging. In the 4th year, your Trustee would require another valuation and if the equity had increased again above a certain amount, then they would want his share of the increase to go to creditors.

7. All of his credit and debit cards, and cheque book should have been taken from him by his Trustee. He should now only have a bank account with a basic cash card.

8. Your boyfriend only just got his paperwork through in time - Student Loans were made exempt from IVAs on 6th April this year. Major stroke of good luck there for him ;-)

Did your boyfriend read the paperwork through thoroughly or just trust in whatever he was told?

MSE has a board for IVAs and bankruptcies that I think would be very useful for him and you to go and have a look through.

My advice? Do not associate yourself financially in any way with your BF or you will be affected. And don't allow yourself to be used as a cash cow and pay for everything because he is short of money. And don't lend him money.

You've worked hard and clearly made sound financial choices for yourself. This guy could ruin everything you've achieved unless you are very careful.