Debt and Divorce

A divorce is rarely easy, it can be a long and challenging process, never mind having to deal with debt and which debts belongs to who.

  • When getting a divorce, you will need to organise your debts 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.


IVAs and Divorce

Couples that are struggling with debts in many instances enter into an IVA or enter into what is known as an interlocking IVA. This is because their finances are interconnected in terms of their living expenses (and possibly joint debts also). If you have an 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?

It is possible that your household income has reduced as a result of the separation and because of this is may be difficult to maintain the 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 some people try their best to maintain the monthly payments with their ex-partner, as at the end of the day, it is in both of their interests to pay off this debt and make their way back to financial stability. However, instead of one set of monthly bills, there will now be two that need to be considered and sometimes this means that people are unable to continue with the original agreement that they initially set up.

Depending on the terms and conditions outlined in the originally 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 even 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. If the IVA is no longer suitable it is possible to look into another debt solutions, so don’t worry.


How will an IVA and divorce affect my property?

If you 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 are required to remortgage during the IVA and you are unable to, another year will be added to the IVA term to cover this.

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. If the IVA is no longer suitable it is possible to look into another debt solutions, so don’t worry.


In Conclusion

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.

If you have any change to your circumstances or are in the process of a divorce and wish to discuss this, you can contact us on 0333 939 7920 and a member of the team here at Aperture will be happy to explore your options with you.