What Is a Joint Debt?
A Joint debt is any debt that you are liable for together with another person. Examples of these include joint bank accounts with an overdraft facility, joint loans, council tax or secured loans such as a joint mortgage account. Guarantor loans can also be considered joint in the respect that if the primary borrower fails to maintain the contractual payments, the lender can pursue you for the full outstanding balance.
Joint debts can be identified by looking at statements you receive or by looking at the original signed credit agreement for the account. If you both signed the credit or loan agreement or the statements are addressed to both parties, the debt is almost certainly joint.
Both parties are wholly and jointly liable for the repayment of the entirety of a joint debt. If one is unable to repay their share the other is legally responsible for the entire amount outstanding and will be required to maintain the minimum contractual payments to avoid any impact on their credit file.
How Are Joint Debts Handled in an IVA?
If you enter into an individual voluntary arrangement (IVA), you are required to include all of your unsecured debts. This includes any that are joint. The issue with this is that the Arrangement only protects you.
The other account holder is not protected by your IVA, and he or she remains wholly responsible for any outstanding balance. If they are unable to make the minimum contractual payments from their own earnings, the creditor may pursue enforcement action against them.
If the account holder cannot afford to continue paying the debt, they may need to consider debt solutions such as a Debt Management Plan, an IVA proposal, a Debt Relief Order or by negotiating lower payments directly with the relevant creditor.
It is important you discuss your proposal to enter into an IVA with any joint party and make them aware of the implications on them so that they can prepare to ensure they can either maintain the payments themselves or make alternative arrangements.
Can Joint Debts be left out of My Sole IVA?
You are legally obliged to include all unsecured creditors and this must include any joint debts in an IVA in your name such as a joint loan or overdraft.
As long as the joint party maintains the contractual minimum payments as and when they fall due, your IVA will not have a negative affect on their credit file.
However, it is important to note that payments can only come from their own income. payments cannot be subsided from your own income.
If the joint party fails to maintain the contractual payments, their credit file will be adversely affected and the creditor may commence collection and enforcement action against them to recover payment.
What If the Joint Party is unable to Pay The Debt?
You could consider applying for a joint IVA if you live together and know from the outset that the joint party will not be in a position to maintain the payments to the joint debt. A Joint interlocking IVA will allow you to both make one affordable monthly payment to cover all your debts.
If you do not reside with the joint party then a joint interlocking IVA may not be suitable. The joint party could seek to enter their own IVA either with the same Insolvency Practice or with any other insolvency practitioner.
Alternatively, if they do not have sufficient debts to enter an IVA or do not have sufficient disposable income, they could look at an alternative debt solution such as a Debt Management Plan through a debt charity like Step Change who provide free debt counselling or the Money Advice Service.
They could also consider bankruptcy or a even a Debt Relief Order if they have little to no disposable income with assets under £2,000 and do not own a property.
Need Further Advice?
If you have any further questions or require free debt advice, please feel free to contact us here at Become Debt Free and speak to one of out friendly advisors. We employ our own Licensed Insolvency Practitioner regulated by the Insolvency Practitioners Association and we can assess what debt solution is right for your circumstances.
