An IVA is an Individual Voluntary Arrangement and under the Insolvency Legislation a couple cannot offer a joint proposal to its creditors for an IVA.
For the purpose of this short article we will assume that the couple are co-habiting and may or may not be married. However, each partner may individually offer to their creditors a proposal for an IVA, provided they are both insolvent. In other words two proposals are offered to creditors one from each partner and these two proposals are often described as being interlocking, insofar that creditors must approve both sets of proposals. In interlocking IVA proposals, if creditors approve one proposal and reject the other, then both sets of proposals are deemed to have been rejected.
Such proposals recognize the mutual financial dependency of the partners. Typically, each partner will have his or her own personal creditors and the couple may have one or more joint creditors. Each partner may have their own assets such as a car and they may jointly own assets such as a house. The statements of affairs of the partners provided in each of their IVA proposals will therefore differ to some extent in relation to liabilities and assets. Usually however, the Statement of Affairs contains a joint Income & Expenditure statement in which the joint living expenses of the couple are met on a basis proportionate to each partner’s individual income. For example, if one partner’s net income (after tax & NI deductions) is twice that of the other partner, then the joint Income & Expenditure Statement will show one partner paying for two thirds of the household expenditure and the other partner paying the other third. The calculation of each partner’s disposable income (DI) will result in the higher earning partner’s DI being twice that of the lower earning partner.
From the point of view of creditors such interlocking proposals for IVA’s will often be attractive, since the administration costs will usually be significantly lower than they would be if each partner were to offer a proposal for a ‘stand alone’ IVA. There are also benefits of simplicity where jointly owned assets (such as the equity in a house) are dealt with on a mutual & similar way, which might not be the case in two ‘stand alone’ IVA’s.
In a scenario where one partner is solvent and the other is insolvent an approach frequently taken is for the insolvent partner to offer a proposal for an IVA with the financial assistance of the solvent partner. In such cases the solvent partner would have to retain sufficient DI to service his or her personal and joint debts on a normal ongoing commercial basis, but could contribute any remaining DI to the IVA of the insolvent partner. Such an IVA is frequently described as an assisted IVA. When such an assisted IVA is complete and the insolvent partner is issued with a Certificate of Due Completion, it is important to remember that the solvent partner continues to be liable for any balances of joint debts remaining unpaid.