All your unsecured debts should be included in your IVA. But what if you owe money to friends and family? Can you continue to pay family debt during an IVA?
Jump to article contents:
- Can you include family debt in an IVA?
- Is excluding the debt an option?
- Alternative options you could consider
Have debts with friends or family and considering an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts.
Can you include family debt in an IVA?
One of the standard rules of an IVA is that all of your unsecured creditors should be included. This is to protect you. Debts left out can still take legal action against you. You will also need to find the money to continue paying them which will be a struggle.
As such if you owe money to a family member or friend it should really be added to your Arrangement. One benefit is you will not have to continue struggling to pay them. However as importantly they will be eligible to vote for your proposal. If they are on your side they are likely to agree. In some cases this could be the difference between it being accepted or rejected.
If you are including debt to a friend or family member they will need to be in a position to do without your payments for the years your IVA is in place. They may share in the money you pay into the Arrangement but what they received will be far less than what you should have been paying them.
Friends or family included in your IVA may not get a share of the money you pay in. As such they are mainly assisting to ensure the proposal is agreed.
Excluding family debt and continuing to pay it
Clearly it is not always possible to add friend and family debt to your IVA. You may not want them to find out about your debt problem. If so you have the option to leave them out. However you cannot count on being able to continue to pay them along side your IVA. It is very unlikely you will be able to afford this.
You are not allowed to include an amount to pay excluded unsecured debts in your living expenses budget. Doing so would reduce the amount you pay to your other creditors. They would be unlikely to agree to this and if asked would not accept your IVA.
That said once your living expenses budget is agreed, you can manage your money how you want as long as you maintain your IVA payment. You might therefore be able to make savings out of some of your agreed budgets and continue paying something to your family that way. However it will not be easy.
It is only really possible to exclude friends and family debt from your IVA if you understand you will not be able to to continue making payments to them.
Alternative options if you can’t stop paying friends and family
The friends or family you owe money to may be able and prepared to wait for their money. If so you should agree you will suspend repaying them until after your IVA has finished. You will then be free to pay them in full.
If they cannot wait then one option to explore is whether they could help you by implementing a debt management solution of their own. This can often help where someone is acting as a guarantor on your behalf.
Where it is simply not possible for you to stop paying them it is unlikely that you will be able to start an IVA. In this situation you may have to consider a debt management plan which is a more flexible solution.
If you simply have no option other than to continue paying your friends and family debt an IVA may not be for you. Contact us and we can discuss the options with you.
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